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Catering for successRestaurants and Bars Report 20242CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024The Restaurants and Bars Report 2024 For the last few years,the UK restaurant industry has been heavily impacted by factors beyond operators control,and 2023 was no different.It was another challenging year across the sector,with stubbornly high inflation,rising interest rates,the cost-of-living crisis and geopolitical tensions increasing pressure on both businesses and customers.However,our industry is nothing if not resilient.In this years report we reflect on what the key challenges are for the future of the sector,and how consumers and operators are responding.We look back at 2023,reviewing deal flow and consumer trends to find opportunities and look forward to changes in 2024.Introduction from Mark Edwards3Priorities for the year ahead4Market and Consumer Overview4Deals Overview10Raising Debt16Homelessness and Hospitality17Business Insurance Claims19Tips&Troncs Update21Headwinds and Opportunities23BDO Sector Expertise24Contacts25ContentsIntroduction from Mark EdwardsPartner and Head of Restaurants and Bars Once again I write the introduction to this report inspired by the continued achievements of so many in our sector.The ability to adapt to changing conditions whether caused by supply chain challenges,macro-economic impacts,changes in consumer behaviour including their location of work,or industrial action on our transport networks has been prevalent throughout 2023.While the December trading figures,especially in the crucial third week,were positive,it would be wrong to suggest that confidence is universally creeping through the sector.While we may have cautious optimism about falling inflation and interest rates,the reality remains that input prices and labour costs are materially higher than 2019 and so it feels like trading records need to be broken just to stand still in terms of conversion to Earnings Before Interest,Tax,Depreciation and Amortization(EBITDA).Free cash flow is then also challenged with materially higher borrowing costs.What will 2024 have in store then?While we have attempted to offer some suggestions,I am fully aware that the year could offer more questions than answers as we navigate economic,political and labour force changes over the coming year.I remain optimistic,however,that operators are more skilled than ever before at dealing with challenges to trading and as always,I expect innovation to be at the forefront over the next 12 months,through necessity and the sectors desire to improve and fight for every discretionary pound available.We are delighted to be able to support you as you navigate the challenges and opportunities of 2024 and beyond.I hope you find our report interesting and informative,and we would be delighted to discuss any of the issues highlighted with you so please do get in touch.I wish you all every success for 2024 and beyond.Mark EdwardsPartner Head of Restaurants and BarsWelcome to the 2024 edition of our annual Restaurants and Bars report:A focused insight into consumer behaviour and trends in the sector.3CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Priorities for the year aheadWith the Labour party refining its green plan by ditching its commitment to spend 28bn a year on the green economy,there has been a sharper focus on what“being green”really means.While we are aware that ESG credentials(covering,of course,not just environmental issues)are key for some lenders and investors,there is a focus on where the value is being driven is it in consumer spending,value enhancement(or lack of erosion)or in the ability to finance operations?Without doubt though there are two key areas to be aware of firstly,any commitments to environmental targets need to be well thought through as failing to meet agreed targets is likely to attract negative attention.Secondly,there is increasing focus and attention in both mass media and regulatory circles about green washing and we anticipate the negative publicity linked to this to be significantly damaging if businesses get caught up in it.Without doubt,last few years have been exceptionally challenging and while we hope for some stability over the coming year or so,a focused boardroom agenda is a must to survive and grow during volatile trading conditions.Here are the key topics we believe should be on the agenda:We all love poring over data.Luckily,thanks to the number of providers willing to report,there is lots about.The reality is its never really about having data,what you do with it.We are seeing already,and we anticipate this will increase over the coming year,the fragmentation of our market different behaviours exhibited by Generation Z(Gen Z)compared to Millennials compared to Baby Boomers and differences in geographical locations,between cities,towns,and villages.While the temptation will always be to try and appeal to as many markets as possible,this risks not really appealing to anyone and so working out not only who are your customers,but as pertinently,who are your customers that deliver your EBITDA and who can enhance it is key.There has been no choice but for prices to increase given the inflationary pressures that the sector has incurred and with the national minimum wage increasing in April there will be more pressure on prices.There must be a point,however,where prices are capped not least if headline inflation is falling to around 2%by Spring.The market feels like we have reached the natural elasticity on pricing where trading down,spending less per visit,or worse,staying at home,is a reality which becomes habit and one that is hard to break.Discounting to demonstrate value is a dangerous strategy at the best of times,but driving business into venues will see novel uses of space,more special events and price bundles.We anticipate that dynamic pricing(reductions rather than commonplace surge pricing)will become more common but in reality,it is bundling rather than discounting that will drive traffic.There are a variety of trends which are emerging and being tweaked since our release from lockdowns and then the economic pressures which followed the Ukraine conflict and the Truss/Kwarteng mini-budget.For example,the increasing use of cash allowing consumers to budget more effectively,the return of workers to offices(and we anticipate this increasing more and more as the economic conditions in the professional service sector in particular become more challenging),the increasing number of health conscious individuals(including the reduction in drinking),the preference for craft over cask.We also note,that premiumisation appears to have stuck as a habit and expectation,but this is leading to some volume erosion as ever focusing on getting a pound out of an existing customer is a lot easier than winning a new one so really understanding the impact of these changes in behaviour is key.The risk of the above is that they tend to focus on challenges rather than opportunities.In reality though,we believe that there could be a strong end to the year.If the stars align then over the next 12 months,we could see interest rates fall,energy costs declining,headline inflation back on target,a good long summer and even potentially a post election new government bounce.The deal market is already anticipating a better year ahead for transactions,and we believe the momentum is going to build steadily as confidence grows in the sector and its ability to adapt to make the most of the improving conditions.Being well placed to make the most of the opportunities ahead should not be forgotten!A sustainable green planAn increasingly fragmented marketPricing is profitChanges in consumer behaviourBeing ready to capitalise on positive news4CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Consumer price inflationBank of England base rateActualActualForecastForecastThe cost-of-living crisis was a prevailing theme in the UK throughout 2023.Both businesses and consumers alike navigated a challenging year of record inflation driving high levels of cost and reducing the overall purchasing power on both sides.Despite the challenging environment,some brands managed to adapt and thrive.As forecasts trend to a more positive 2024,BDOs Strategy team recaps the year and highlights key themes through observations and analysis of the hospitality sector.Market and consumer overviewTom HoltPartner,Strategy&Commercial Due Diligence 44(0)73 8593 3809 tom.holtbdo.co.ukTushar Chadha Associate Director,Strategy&Commercial Due Diligence 44(0)79 7095 7956 tushar.chadhabdo.co.ukEconomic driversInflation is expected to continue to drop,but there is still considerable headroom before it reaches target levels.The UK appears to have weathered the peak of the cost-of-living challenge with inflation stabilising at a more palatable 3.5%.However,forecasts for 2024 suggest a period of sustained high interest rates,which may lead to a recession during Q1 of 2024.This is likely to continue to put a strain on the purchasing power of the UK consumer.For the hospitality sector,this means that the upcoming year will be one of more fierce competition as brands try to compete for the diminished levels of consumer spend.Interest rates are expected to remain stable through 2024,with an eventual reduction from Q4 onwards.12%8%6%4%2%0%-2%6%5%4%3%2%1%0 0820082009200920102010201120112012201220132013201420142015201520162016201720172018201820192019202020202021202120222022202320232024202420252025202620265CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Market and consumer overviewConsumer behaviour drivers The high inflationary environment has created behaviours akin to an hourglass economy where the premium and value end of the market receives the most traction,squeezing out the middle-income spending patterns.Successful brands have used the current economic climate to re-engage with their core customer base and reaffirm their value proposition that initially propelled them to success.Alternatively,new entrants into the market are strategically targeting distinct pockets of consumers(by generation,income or by a combination of the two)to cultivate a dedicated following.Consumer confidence remained volatile through 2023,but the overarching movement has been favourable.The prospect of fiscal certainty for consumers,when coupled with easing cost-of-living pressures,may lead to a more buoyant start to the year than observed in recent times.Household disposable income remains below levels observed pre-2023,which will continue to be the hospitality sectors main challenge for the upcoming year as consumers look to stretch the value of each pound spent.Consumer confidence IndexAsda income trackerAxis value is 100.A score of 100 represents a positive score.115110105100959030025020015010050020%5%0%-5%-10%-15%-20 162004200520062007200820092010201120122013201420152016201720182019202020212022202320242017201820192020202120222023Income TrackerYoY changeForecast year6CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Market and consumer overviewConsumer trendsBDOs seasonal consumer study reveals a positive shift in the sentiment towards drinking and eating out between Autumn 2022 and 2023.This is particularly evident when comparing anticipated spending over the next six months.This positive trend bodes well for sector operators as they look to 2024,resonating with key economic factors such as consumer confidence and household disposable income.Theres still potential for growth across all age groups,particularly within the 35-64 demographic,where theres a significant opportunity to enhance sentiment.This scenario offers businesses a crucial opportunity to develop and execute strategies specifically tailored to re-engage this key segment of the UK market.DemographicBDO Survey insights Business considerations 1824The 1824 age group is the only demographic that exhibits a net positive sentiment towards eating and drinking out in the next six months.The rising cost of overseas travel has shifted preference to more domestic leisure&hospitality activities,presenting a notable opportunity for businesses in the sector.Prioritising the experience:44%of this demographic prioritise leisure and experiences over product purchases highlighting the importance of tailoring marketing strategies to emphasise the experiential aspect of dining and drinking establishments.35-4445-54The ongoing strain from elevated interest rates and rental prices is negatively influencing the spending behaviours of these demographics.Specifically,50%of those aged 35-44 and 47%of individuals aged 45-54 are expressing concerns due to these categories of expenditure.Re-engage through value:As interest rates are expected to remain elevated through the majority of 2024.Implementing targeted promotions and cost-effective offers can serve as effective tools to mitigate the impact of high interest rates on consumer spending patterns.Businesses should consider tailoring discounts to specific needs and preferences of this demographic such as family discounts.55-64The sentiment of approximately 80%of this demographic has been affected by the rise in grocery prices and utility costs.However,with a downward trend in inflation,there is an observable improvement in sentiment as we head into 2024.Entice through loyalty:With expectations of inflation continuing a downward trend in the coming months,businesses should consider the imminent opportunity of increased spending within this demographic.By creating enduring loyalty through tailored rewards,and personalised incentives,businesses can not only alleviate the impact of past financial strains but also cultivate heightened interest in their proposition.Drinking outEating out400 %0%-10%-20%-30%-40%-500 %0%-10%-20%-30%-40%-50-24years18-24years25-34years25-34years35-44years35-44years45-54years45-54years55-64years55-64years65 years65 yearsNet spend-past 6 months(Autumn 23)Net spend-past 6 months(Autumn 22)Net spend intention-next 6 months(Autumn 23)Net spend intention-next 6 months(Autumn 22)7CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Market and consumer overviewTo tackle economic challenges and navigate the evolving consumer landscape,brands are deploying cost optimisation and revenue-boosting strategies to gain a competitive edge.While not necessarily groundbreaking,when executed effectively,these strategies have delivered noteworthy outcomes throughout the year.Revenue focusedCost focusedStrategies businesses are exploring Brand spotlight Introducing loyalty programs Brands are looking to boost customer loyalty with the promise of future discounts and rewards to drive higher spend frequency and value.BDOs Consumer Trends survey found 20%of consumers looking to cut back spend on eating and dining out plan to use loyalty programmes.Prets revamped loyalty scheme has boosted turnover 20%(H1)and seen average transaction value up 30%.Experiential dining/socialising Enhancing the atmosphere with activities or design to differentiate and grow the value perception.Big Mamma Group have built value perception through fun and social media worthy interiors and energetic service.To overcome capital constraints and adverse rent to revenue ratios,businesses have de-risked their site roll out strategy by moving to suburban locations.Megans has consistently targeted suburban locations and have built a community of loyal customers with concepts such as community nights and live music.The operator recently reported its strongest Christmas on record,19.3%like-for-like sales growth and has lined up four openings for this year,remaining on track to deliver 30m in revenue.Along with cost savings,this has also introduced brands to consumer segments and improved levels of repeat purchases.Convenience formats Smaller site offerings such as takeaway or dark kitchen formats for budget and convenience led customers.Wagamamas return on capital for dark kitchen has ranged between 35-40%for 2023,driven by the lower CAPEX requirements.Tech enabled solutionsIntroducing tech solutions in front and back of house,to reduce reliance on labour and increasing cross/up-selling opportunities.YO!Sushi have a fully integrated tech system,reducing labour requirements and differentiating the customer experience.Revenue focusedCost focusedTargeting suburban locations8CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Asset model strategySupply chain and operations streamliningUsing consumer insights to develop and enhance marketing and brandingAccess to our seasonal consumer sentiment tracker and other thought leadership articles can be found hereProposition and sales channel recommendationsRevenue and cost analysisCompetitor benchmarking and key learningsImproving customer experienceMarket and consumer overviewOur experienced Strategy&Commercial Due Diligence Consumer team has worked with major players across the hospitality sector.Key to our success is our ability to understand the UK consumer and their dining and leisure habits,and how these will impact the modern restaurant and bar concepts of today.Our hospitality-focused services include:About the strategy&commercial due diligence consumer team9CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Chart 1:LFL sales Source:Company Trading UpdatesPositivity is on the horizon for the UK restaurants and bars sector with inflation falling,interest rates stabilising,and a strong return in deal activity.In a remarkable turn of events,two of the UKs leading restaurant groups,Fulham Shore and The Restaurant Group,announced they will be exiting the UK listed market,following offers from international trade and private equity buyers respectively.In the pub sector,which has had a challenging year,there was one notable deal that stood out-the acquisition of AIM-listed City Pub Group by competitor Young&Cos Brewery plc.December saw yet another take-private deal with the acquisition of bowling operator Ten Entertainment by Trive,a Texas-based private equity firm.Deals overviewHarry StoakesPartner,M&A 44(0)77 8557 6325 harry.stoakesbdo.co.ukYashna GopalSenior Manager,M&A 44(0)78 7026 0256 yashna.gopalbdo.co.uk2023 started with some stark numbers 10%inflation rate,17%food inflation rate,3.5%interest rate.These figures worsened during the year but showed promising signs in the last quarter.Despite the challenging consumer environment,R&B operators were able to grow their top-line revenue by implementing price rises and managing volume carefully.The like-for-like(LFL)sales analysis(Chart 1)shows most operators reported positive LFL sales in the year.However,they continually faced cost pressures from a number of directions food,energy and wages.Pub Groups Restaurant/Bar GroupsOther Leisure Groups *Hollywood Bowl Group UK division only.LfL of Canada division is 15.1%.*Punch Pubs Group is revenue growth rather than LfL sales growth.*Youngs LFL growth is their managed division only.0.0%2.0%4.0%6.0%8.0.0.0.0.0.0%-2.0%-4.0%-6.0%-8.08 weeks to 17 September 2023(vs.2022)42 weeks to 20 January 2024(vs.2023)52 weeks to 13 August 2023(vs.2022)*25 weeks to 21 January 2024(vs.2023)34 weeks to 27 August 2023(vs.2022)36 weeks to 20 January 2024(vs.2022)15 weeks to 13 January 2024(vs.2023)52 weeks to 15 April 2023(vs.2022)13 weeks to 1 January 2024(vs.2022)*34 weeks to 27 August 2023(vs.2022)24 weeks to 1 October 2023(vs.2022)26 weeks to 2 July 2023(vs.2022)26 weeks to 1 January 2024(vs.2023)52 weeks to 30 September 2023(vs.2022)*26 weeks to 2 July 2023(vs.2022)12.4.5.2.1%8.1%7.7%6.1%4.7%9.0%7.7%0.0%-2.8%4.1%1.6%Competitive Socialising10CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Chart 2:Latest EBITDA margin v/s pre-COVID-19Source:BDO Research,Companies House Deals overviewOur analysis of key sector operators margins shows that most operators have been able to hold their gross profit(GP)margins to pre-COVID-19 levels,by passing on increases in food and beverage costs to consumers.However,the decline in EBITDA margins compared to pre-pandemic levels has been evident,as shown in Chart 2 opposite.Players in the competitive socialising space such as Ten Entertainment and Hollywood Bowl,which benefit from substantial incremental profit from additional sales of high-margin activities,have seen their EBITDA margins rise in this period.The realm of experiential leisure and competitive socialising,beloved by Gen Z,is continuing to thrive,marked by a steady influx of fresh and innovative concepts introduced every year.2023 saw the introduction of F1 Arcade,a Formula 1 racing simulation experience venue and TOCA Social,an immersive football and dining experience venue.These concepts add to a growing list of experiential leisure operators in the UK such as Flight Club,Clays,Bounce,Swingers,NQ64,and Puttshack.Most competitive socialising businesses are Most recent EBITDA MarginFY19 EBITDA MarginCompetitive Socialising14%8%7%9%4& $ D2%7(#()%0%5 %05EP%currently backed by investors such as Edition Capital and Imbiba which actively pursue new leisure deals.We expect that sub-segment to be at the centre of M&A activity over the next couple of years as more brands emerge in this growing landscape and existing investors look to realise their investments.Pub operators,who have been experiencing declining EBITDA margins,will surely discover the attractiveness of the competitive socialising brands that have proved that they are not just a short-term trend but long-standing,profitable businesses commanding margins double those of pubs.11CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Chart 3:Hospitality M&A deal count by quarter,2018 2023 Source:MergerMarket,BDO IntelDeals overviewPub deals in 2023 were scarce,with some large operators bringing portfolios of sites to the market to rationalise their estates.There was significant activity in the restaurant sector,which has seen heightened interest from international and private equity buyers.1614121086420Number of deals(UK-based targets)2018Q1Q1Q1Q1Q1Q1Q2Q2Q2Q2Q2Q2Q3Q3Q3Q3Q3Q3Q4Q4Q4Q4Q4Q42020201920212022202328 incl.COVID-19 restructuring5123 incl.3 CVAs222724141514887664364865559551388312CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Deals overview2023 started with the news that Stonegate was planning to offload 1,000 pubs,representing a fifth of its pub estate,for an estimated 800m to pay down its 3bn debt pile.The most notable pub deal of the year was the sale of 50-site City Pub Co.(CPC)to Young&Cos Brewery in November 2023,valuing the pub group at 162m.Shareholders of CPC received 75%of the consideration in cash,with the remainder as shares in Youngs.60%of the groups sites are freehold assets,with a 2022 independent valuation valuing 17 of its properties at 98m.In the lead-up to this deal,CPC sold 5 of its sites to Portobello Starboard in March 2022,and increased its shareholding in Mosaic Pub Group to 52%in April 2023,taking over its operations.The sale announcement disclosed that CPC had head-office costs of 5.6m and that the deal would generate GP savings of 3pp,which BDO estimates to be worth 1.7m.Given its FY22 adjusted EBITDA of 8.0m,we estimate that the deal value 10.6x site EBITDA.The 2022 Edition of our Restaurants and Bars report highlighted the low valuation of both TRG and Fulham Shore,which has been the source of frustration for both Table 1:Analysis of share prices of listed operators taken private Source:S&P Capital IQTen EntertainmentCity Pub Co.The Restaurant GroupFulham ShoreAnnouncement dateAcquisition price per share(p)06 Dec 20234.0916 Nov 2023136.0012 Oct 202365.8005 Apr 202313.90Share price 1 day pre-announcement(p)v/s acquisition price per share3.1032.0037H.3536.5032%Avg.Share price 1 year pre-announcement(p)v/s acquisition price per share2.8046.82589.2268.7418%Avg.Share price 1 year pre-COVID-19*(p)v/s acquisition price per share2.5362 8.33-356.57-52.3323%*Mar 2019-Feb 2020management teams and sector investors.Both companies have since received takeover offers from international players.All the deals represented a premium of at least 30%of the previous days share price and premiums on the average share price in the last year.However,CPC and The Restaurant Group(TRG)s share prices on take-over were below the average pre-COVID-19 share price.13CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Chart 4:Market Capitalisation of The Restaurant Group plc,2019 2023 Source:S&P Capital IQDeals overviewThe lions share of M&A deals in the sector in 2023 was in the restaurant space,with strong interest from overseas buyers.2023 started with private equity firm TriSpans acquisition of Indian casual dining group Mowgli,providing an exit with a 3.5x money multiple for Foresight,which had invested 3.45m in 2017.Founder Nisha Katona has maintained a significant interest in the company and will continue as group chief executive.In April 2023,Fulham Shore,which operates the Franco Manca and The Real Greek restaurant brands,announced that it would be acquired by Toridoll Holdings Corporation,in a deal valuing the business at approximately 93m.Japan-based Toridoll operates Marugame Udon,Shoryu and Wok to Walk in the UK in partnership with private equity firm Capdesia.The acquisition price represented 7.5x of its FY22 Adjusted Headline EBITDA of 12.4m,which includes the reduced VAT benefit.In the same month,global investment platform Mohari Hospitality announced its acquisition of Tao Group,the restaurant and late-night entertainment group which owns brands such as TAO and Hakkasan,from MSG Entertainment.The transaction valued Tao Group at$550 million,which represented estimated 8.2x its FY22 adjusted operating income.In September 2023,McWin,the private equity firm founded by Henry McGovern and Steven K.Winegar,acquired a majority stake in Big Mamma,the Italian-cuisine restaurant group founded by two French entrepreneurs.Big Mamma has a portfolio of 23 restaurants across five European countries and was valued at 270m.In the same month,The Restaurant Group(TRG)announced an agreement to transfer its loss-making Leisure Division,consisting of Frankie&Bennys and Chiquito,to the Big Table Group,which is backed by the private equity house,Epiris.Although TRG paid 7.5m to Big Table for this transfer,the market received the news positively and its share price increased 7%on the announcement.A carve-out of this nature had long been anticipated by the market,especially following the huge pressure from Hong Kong-based investor,Oasis Management,which had been calling for a shake-up for months.Weeks later,it emerged that that deal was a minor procedure ahead of a more significant intervention.TRG announced it had received a 506m offer for its shares from US buyout group Apollo,which would take it private.The deal valued the group at 701m,representing 9x of its LTM EBITDA.The acquisition value was deemed soft by many analysts,considering the value of the groups Wagamama brand,one of the UKs best restaurant brands,which was itself valued at 559m on acquisition in 2018.There is also c.160m of freehold value from the Brunning&Price pubs within the group.1,2001,0008006004002000Market Capitalisation(m)Dec-02-2019Jan-02-2020Jan-02-2021Jan-02-2022Feb-02-2020Feb-02-2021Feb-02-2022Feb-02-2023Mar-02-2020Mar-02-2021Mar-02-2022Mar-02-2023Apr-02-2020Apr-02-2021Apr-02-2022Apr-02-2023May-02-2020May-02-2021May-02-2022May-02-2023Jun-02-2020Jun-02-2021Jun-02-2022Jun-02-2023Jul-02-2020Jul-02-2021Jul-02-2022Jul-02-2023Aug-02-2020Aug-02-2021Aug-02-2022Aug-02-2023Sep-02-2020Sep-02-2021Sep-02-2022Sep-02-2023Oct-02-2020Oct-02-2021Oct-02-2022Oct-02-2023Nov-02-2020Nov-02-2021Nov-02-2022Nov-02-2023Dec-02-2020Dec-02-2021Dec-02-2022Apollo takeover offer announced Avg.Share price 1 year pre-Covid-19Takeover-25% 68%Avg.Share price 1 year pre-annoucementLeisure Division transferred to Epiris 14CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Deals overviewOn the quick service restaurant(QSR)front,M&A activity was relatively quiet with only a couple of transactions throughout 2023 until December when EG Group,the largest KFC franchisee in Western Europe,announced the sale of its UK&I KFC estate to Yum Brands(KFC brand owner).Papa Johns International also acquired the UK sites from Drake Food International,its largest international franchisee.Asian QSR brand Chopstix led the first deal in the QSR space in 2023 with its acquisition of 27-site competitor Chozen Noodles which operates in motorway service areas,for c.2.4m.The acquisition brings the total size of the Chopstix estate to 127 sites.In June,Papa Johns International acquired 91 restaurants previously operated by the franchisee Drake Food Service International,its largest international franchisee.The acquisition will allow Papa Johns to operate its first company-owned sites in the UK,which it expects to use as test sites for operating enhancement initiatives.EG Group,the largest KFC franchisee in the UK and Ireland,announced that it had agreed to sell its entire 218-site estate in the UK and Ireland to Yum Brands KFC division.The transaction is expected to complete in the first half of 2024.No financial terms were disclosed in the announcement.KFC GB previously embarked on a refranchising strategy across their UK estate and this latest deal would suggest a reversal of that strategy.Conclusion For a long time,there has been frustration around suppressed valuations in the UK listed markets.2023 was an interesting year to see international investors and buyers start to exploit that gap.We expect this trend to continue,with more take-private transactions in the restaurants and pubs space this year,until valuation multiples recover.The slowdown in pub M&A activity in the year comes as no surprise many pub operators have been focused on upgrading their existing estates and ensuring they are able to deliver rewarding experiences to their customers.They are also facing growing competition from competitive socialising operators for discretionary consumer spend.Pub groups will need to re-invigorate their offering to adapt to the evolving needs of the younger generation,who are reducing their alcohol consumption and attribute more value to experiences.Introducing paid activities within pubs will not only provide an additional income source but will also increase dwell times and further bolster the food and beverage income stream.We anticipate that large international investment firms and leisure operators will recognise the vast potential in the competitive socialising space in the UK.They will seek to turbocharge growth through investments and consolidation,and also take the successful concepts globally.Sustainability&ESG Thinking in Exit StrategiesIn the face of regulatory and inflationary pressures,an emphasis on sustainability&environmental,social,and governance(ESG)performance is now a long-term strategic necessity,not just a passing trend.Traceability in long,complex supply chains particularly those that carry material environmental risks,such as the land and water footprints of sourcing meat is a fundamental precursor to operational sustainability.A shortening and digitalising of supply chains would not only better weather global disruptions but also drive value:companies that improve their ESG scores tend to experience an EV/EBITDA multiple greater than the associated net financial costs of green investment,including in the services and consumer goods sectors.Consumer preferences will also inevitably shape exit strategies.40%of consumers report that they would prefer to drink at a venue committed to net zero by 2030,and 59tively consider a beverages environmental credentials before buying up from 56%in 2021,despite the ongoing cost-of-living crisis.Operators looking to exit the sector in the next decade must recognise that ESG is not just a nice-to-have;it is essential for safeguarding future value and reducing risk,and it is here to stay.Edward Sell Business Analyst 44(0)77 1216 3643 edward.sellbdo.co.uk15CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024When a restaurateur is juggling the competing demands of rising fuel bills,higher costs of raw materials,a cost-of-living crisis,staff shortages and rising rents,they might be forgiven for not devoting too much headspace to those in the banking community.But while conditions for raising debt are better than any time in the last four years,a business owner must be properly prepared if they are to raise the best terms.Raising debt Steve CarrManaging Director Debt Advisory 44(0)79 7094 8777 steve.carrbdo.co.ukWith COVID-19 lockdowns firmly in the past,restaurants can now see a clear picture of their earnings unaffected by pandemics,bounce-backs or government support schemes.Likewise,lenders can put their trust in the numbers,making them more likely to want to back the winners in the sector.Not that every lender is open for business.There are some lenders who are hesitant,perhaps looking across their portfolios at businesses still struggling to recover from such unprecedented events.But others have backed the sector,with OakNorths support of TriSpans investment in Indian casual dining group Mowgli catching the eye.Despite the turmoil of the last few years,the restaurant sector offers a great product and service to UK consumers.The public increasingly wants memorable experiences and Instagram moments,and restaurants can deliver those in bucketloads.But turning great experiences for consumers into a great business that lenders will want to support requires not just a differentiated concept or a gold-leafed steak it needs a great management team.So,what does a management team need to do to raise debt?Lenders love financial data.It helps them to overcome questions from their credit committee members.If they can tell a story to their credit committee about a differentiated offering and display a management team on top of their finances,lenders can be more persuasive in the heat of battle with Credit.For example,data showing strong trading,including like-for-like growth in sales at existing sites,an ability to manage margins despite increasing costs,and positive cash generation from each site will all help to convince a sceptical banker they are looking at a management team at the top of their game.For those wishing to raise debt to expand the number of sites,understanding how well previous site openings have performed(and the return on capital employed)is crucial.If a lender can see a track record of successful historical sites and understand how quickly the initial investment turns into profits and cash,they may be more easily persuaded to back a future site roll-out.Lenders will also want to see lease terms and the extent of fixed costs in the business to understand how vulnerable a business might be to a wobble in trading.The other factor to consider is to find the right lenders to approach-those with appetite for the sector and the right size of business.This is where getting the right advice can really help to find that pocket of liquidity.Typically,when you go to market you get one chance to get it right.It isnt easy to turn a“no”to a“yes”,and bankers have long memories.But lenders are out there for the right businesses,and especially the best management teams.16CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024The UK is experiencing a homelessness crisis with rough sleeping and the use of temporary accommodation at record highs.Rough sleeping is the most visible and dangerous form of homelessness,but living in temporary housing,hostels and B&Bs are incredibly damaging to individuals too.The impact of homelessness is stark.Homelessness and hospitalityEmma HaddadChief Executive Officer,St MungosJosh TrottCorporate Partnerships Manager,St Mungosjosh.trottmungos.orgAbout St MungosOur mission is to end homelessness and rebuild lives.We envision a society where everybody has a place to call home and can fulfil their hopes and ambitions.Homelessness and the hospitality sectorHomelessness and the hospitality sector intersect,with customers and colleagues seeing the impact of rising homelessness in both their personal and professional lives,undoubtedly seeing homelessness in its most extreme form as they travel to and from work or when socialising.Your colleagues and employees could be placed in situations where they need to have difficult conversations with people who are rough sleeping,without the knowledge or skills to do this in a constructive and positive way.Research commissioned by St Mungos found that people working in the gig economy,including in hospitality,were at greater risk of homelessness than in other sectors.With rising rates of homelessness,it is likely that there could be hidden homelessness either within your business or your supply chain.Both employees and customers are becoming more socially aware,and social responsibility is driving both greater brand loyalty and greater staff retention.A recent study found that 78%of people think it is important that brands have a strong sense of community,and in another study 53%would not work for an employer they thought to be unethical.Since 1969,weve been at the forefront of efforts to tackle homelessness.No two experiences of homelessness are the same.Thats what makes our holistic approach so important,and why our range of services is so broad.We support people from rough sleeping into emergency accommodation,before finding somewhere safe for them to call home and to begin their recovery from homelessness.This could The latest statistics highlight the scale of the crisis:X There was a 23%increase in rough sleeping in England in the past year,with 4,389 people seen sleeping rough in Greater London between October-December 2023 X 2,283 people were rough sleeping for the first time,a 34%increase on the same figure this time last year.The causes that push someone into homelessness are complex,but the cost-of-living crisis and severe shortage of affordable housing are creating a perfect storm and pushing more and more people into homelessness.It is a trend we expect to continue.The average age of death for a man experiencing homelessness is 45.For women it is just 43.include mental health support,training to develop new skills or employment advice,but each of our clients journeys are unique and we tailor our support to meet their specific needs.17CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Homelessness and hospitality“Meeting Grace(Employment Advisor at St Mungos)really was life-changing for the better.Id never thought about working in food or hospitality I was in construction before.But I sat down with Grace and thought,what could I do.Grace helped me get an interview with Le Manoir,and then I got the job!It felt unreal when I got it.I didnt expect it at all.The people there really saw the person within and saw my potential.I cant really believe it,where I am now.I have just recently come off anti-depressants,as it felt like it was my time.And Im now really feeling like myself again.And a lot of that is down to St Mungos.”Chris,St Mungos clientHow St Mungos can help the hospitality sectorSt Mungos has a track record of building innovative,bespoke partnerships with leading businesses from a range of sectors to help support people experiencing homelessness and move us closer to our vision of ending homelessness for good.Ways in which we have supported restaurants and bars include:RecruitmentRetaining and recruiting talent is an ongoing challenge for the hospitality sector,which has been particularly affected by the wider labour shortage issues in the economy.Having a job is a vital step in someones recovery from homelessness and we know that 62%of our clients want to work,but currently only 7%do.Meaningful employment provides so much more than a salary;it provides a social network,a purpose,confidence,and improved mental health.St Mungos works with a wide range of businesses to create employment pathways for our clients,where both our clients and the employer feel fully supported to make the opportunity a success.A career in hospitality could help our clients to leave homelessness behind for good,all whilst helping to address a major challenge your business likely faces.TrainingTransient workers and those in the gig economy are some of the most vulnerable to homelessness.There is also a lack of skills,knowledge,and expertise in where to go for support when it is needed,or how to identify people most at risk of homelessness within a business.To create a better understanding of the complexities of homelessness,St Mungos developed HomelessWise training in collaboration with,and for,the business community.Homelesswise training helps to:X Provide management with insights to help identify those most vulnerable to homelessness from within a business,and the knowledge to notice the risk factors associated with homelessness X Equip relevant teams with the skills and confidence to support colleagues experiencing homelessness effectively and compassionately X Give practical advice for public-facing teams,such as security,facilities management,or front of house to have constructive and empathetic conversations with homeless people they may encounter.Simply put,HomelessWise training will improve your knowledge and understanding of homelessness and provide real-life guidance on how to approach engaging someone who is experiencing homelessness.It ensures that both your colleagues and anyone experiencing homelessness feel respected in their interaction and able to have difficult conversations in a supportive way.Engaging your customers As customers continue to become more socially conscious,they make purchasing decisions based on how businesses approach their environmental and social responsibilities.St Mungos has a track record of engaging customers through our partnerships with businesses and we would work alongside your teams to tell compelling stories to your customers and create ways for them to engage with our partnership.18CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Although COVID-19 is to a large extent in the rear-view mirror,the repercussions are still being felt by many.The UKs hospitality sector remains front and centre in the ongoing struggle to get business interruption insurance claims paid almost four years since the start of the pandemic.Business interruption insurance claimsPaul HopeDirector,Forensic Accounting&Valuation Services 44(0)74 0789 0788 paul.hopebdo.co.ukAlthough COVID-19 is to a large extent in the rear-view mirror,the repercussions of it are still being felt by many,and the UKs hospitality sector remains front and centre in the ongoing fight to get business interruption insurance claims paid;more than four years since the start of the pandemic The sector was one of the hardest hit,with restaurants,pubs and bars being some of the first words to pass the Prime Ministers lips when he first raised the spectre of mandatory closures and lockdowns in March 2020.Even after the restrictions had been lifted,changes in customer behaviour,staffing issues and supply chain disruptions continued to impact revenues and costs.Exacerbated by rising interest rates,rocketing energy prices and general price inflation,this has left many hotels,restaurants,pubs,and bars struggling to stay afloat,and others having to close their doors permanently.As with other sectors,many hospitality businesses take out insurance cover against the risks of interruption to trading.Policy coverage varies widely but,in general,business interruption coverage is linked to the property damage section of the policy;meaning that for the business interruption policy to respond there has to have been some physical damage to the insured property(e.g.in the case of a fire,flood or other unforeseen event).However,policy extensions are available(typically at an increased premium)to cover additional non-damage risks,such as supply chain issues,diseases,or hindrances in access to business premises.As one would expect,many hospitality businesses quickly took the insurance policy out of the filing cabinet and notified their insurers of claims.The problem was that COVID-19,and the governments response to it,was(to use a word we heard all too often)“unprecedented”,and it was unclear if,how and to what extent the policies provided cover.Faced with a deluge of claims,many insurers took the initial stance of denying cover,much to the consternation of hundreds of thousands of policyholders,a large proportion of which were in the hospitality sector,facing significant cashflow issues.Due to the magnitude of the issue,in June 2020 the Financial Conduct Authority(FCA)stepped in,using its powers as regulator of the insurance industry to bring an expedited case(based on a representative sample of policy wordings)to the High Court in July 2020.The judgment was handed down in September 2020,appeals(from both the FCA and insurers)heard in November 2020(leapfrogging the Court of Appeal and going directly to the Supreme Court),with final decision handed down in January 2021.This process was the first use of the Financial Market Test Case Scheme-unprecedented issues called for unprecedented legal procedures!The FCA Test Case provided some much-needed relief for impacted businesses when it established that(contrary to many insurers initial positions)the wide vicinity/radius diseases extensions in many business interruption policies(whereby there must be an instance of a covered disease within a specific radius of the insured premises)should provide coverage for pandemic-related losses,as should denial of access clauses in certain circumstances.However,it still left a lot of issues remaining to be clarified.19CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024For example,it did not determine fact-specific issues such as whether claims could be made for multiple separate instances of loss or the amount that should be paid in particular cases.Since then,there have been several high-profile court cases,heavily featuring hospitality sector businesses(for example Corbin&King(now The Wolseley Hospitality Group);Stonegate Pub Company;Greggs;and Various Eateries),which have explored further significant policy coverage issues with broad relevance to the hospitality sector,such as:X Further nuances to coverage under denial of access clauses X Whether policy claim limits apply on a per premises basis,or across the group X If and how events should be aggregated for the purposes of determining how many separate claims a business can make(which is relevant to the application of individual claim limits)X Whether or not credit for the benefit of the insurer should be given in the claims for receipts of Business interruption insurance claimsgovernment assistance,such as furlough payment support a key issue for the hospitality sector where employment costs are a significant proportion of overall expenses.Since those decisions,there have been further legal cases exploring other key issues,such as that of the London International Exhibition Centre(owners of the ExCel conference centre in London),which established that policies providing cover for diseases at the premises should essentially respond in the same way as the wide vicinity/radius disease clauses which were the subject of the FCA Test Case,which could potentially affect hundreds of thousands of policyholders.Whilst the outcomes of these cases appeared to provide some much-needed clarity for businesses and insurers,many of the key issues decided at first instance were to be the subject of appeals by claimants or insurers(for example the method of aggregation,and the deduction from claims of furlough),although some appeals have since been abandoned,with both Greggs and Stonegate settling with their respective insurers during 2023 on undisclosed terms.January 2024 saw judgment being handed down in the Various Eateries appeal,with the Court of Appeal confirming the earlier decisions of the High Court,meaning essentially that policyholders can claim for multiple loss periods,aggregating around certain government restrictions,albeit only where restrictions become worse(i.e.mere extensions or relaxations of existing restrictions do not trigger a new claim).January 2024 also saw the outcome of several test cases against Liberty Mutual,again featuring claimants in the hospitality sector(for example Fuller Smith&Turner,and Hollywood Bowl Group).Seen as largely a success for policyholders,in brief,the court found that the UK Government is a“statutory authority”within the meaning of the denial of access clause,and that the limit of liability applies separately to multiple insured entities under a composite policy.However,consistent with the earlier finding in Stonegate,the court decided that insurers are entitled to take the benefit of furlough payments received by policyholders.At the time of writing,expectations are that the furlough issue will be taken to the Court of Appeal later in 2024.It should be noted however that each of the cases since the FCA Test Case have been litigated on their own specific facts,and there remain many other issues at present untested(for example the question of damages resulting from late payments by insurers causing consequential losses to policyholders).What help is available to the hospitality sector?It seems fair to say that this all leaves the current state of claiming and quantifying business interruption claims as a complex one.There are many different forms of insurance policy wording,and every business will have faced its own specific set of challenges.But help is available,from specialist forensic accountants with experience of complex business interruption claims.20CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Tips&troncs update John Chaplin Partner,Global Employer Tax Services 44(0)77 6727 4436 john.chaplinbdo.co.ukCheryl ThomsonSenior Manager,Global Employer Tax Services 44(0)75 8306 3895 cheryl.thomsonbdo.co.uk1.All tips,service charges and gratuities(“tips”)must be paid to employees(including cover charges,mandatory service charges and discretionary tips).As a result,you may need to amend any employment contracts,Tronc scheme rules and even the split between contractual pay and tips etc.How will you communicate this to employees?How will any changes impact your NMW calculations?If you have a Tronc scheme,the changes required will need the buy in of any Troncmaster/Committee.You will need to maintain the independence of the scheme to avoid unnecessary NIC liabilities.What should an employer be doing now?One key change is that employees will be entitled to receive 100%of tips made by customers,without any deduction,except in very limited scenarios e.g.for deduction of income tax.It is important that this is communicated to employees in a way that makes it clear to them what their allocation is and that it flows transparently through to their payslip.If you currently retain part of any service charge,for example,you may need to review your entire remuneration package for qualifying staff if you want to avoid a significant increase in pay levels and a reduction in company income.The Allocation of Tips Act received Royal Assent on 2 May 2023.The Draft Code of Practice on Fair and Transparent Distribution of Tips has now been issued alongside HMRC opening a consultation for comments from employers which closes on 22 February 2024.Non-statutory guidance will be issued in due course as it is confirmed the Act will come into force from 1 July 2024 to help affected employers to operate best practice.The Framework is expected to encompass the Statutory Code of Practice,setting out the finer points of the new rules,and so you might be reluctant to make too many changes until the consultation is concluded,but there are many practical changes you can be looking at implementing in advance.Whilst an extension to 1 July 2024 might be welcome news for businesses who are not yet at a stage where their tips and tronc schemes fully reflect the new rules,more proactive businesses can use the potential delay to ensure that changes fully reflect the needs of the employees and the business.So,rather than sit and wait,what can you do in the meantime?The finer points setting out how tips must be paid to employees will not be clear until the Framework is published but,as a minimum,we expect the following headlines to apply:2.The distribution must be fair and transparent Tronc scheme documentation and any policies on tips may well need amending so that it easy for all employees to follow and understand.Tips can no longer be shared between multi-site businesses.Employees who regularly work between sites to cover busy or slow periods must be aware of the impact this may have on their tip allocation.Do your current records make it easy to calculate payments per site and feed this into payroll in time?You may need to phase in any changes over time so be clear on what changes are needed for joiners versus current employees and when everyone needs to be on the same terms when the legislation“goes live.”21CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Tips&troncs update3.Tips paid must be paid to employees by the end of the month following the month they were paid by the customer(e.g.a tip received from customer on 15 October must be paid to the employee by 30 November)Will this leave you enough time to record,calculate and pay tips?Will your payroll calendar need amending?If you have a Tronc,do you have a clear process setting out on how the Troncmaster summarises all tips received and issues instructions to the payroll team to facilitate the payments within the reporting deadline?4.Agency workers will be entitled to receive tips in the same way as employees If you engage agency workers,you should discuss with those agencies how both parties will deal with the payment and taxation of tips(including Troncs).If the agency is to pay the tips on your behalf,you will need to ensure that they are paid in accordance with the new rules,and you may wish to check this occurs.Will the agency agree to provide with this information?If agency workers do not currently participate in tips,do you need to communicate the changes to your employees who may now receive a smaller allocation?5.Employees and agency workers have up to 12 months to raise a dispute through an employment tribunal.You should have a clear process in place for handling employee queries and disputes quickly and efficiently,and make sure that employees understand how to raise any questions to help prevent unnecessary claims made direct to the Tribunal.In short,these changes represent a significant shift for many hospitality businesses.However,if approached carefully,far from being a risk to your business,they might represent an opportunity for you to be an employer of choice.As the draft Code of Practice has now been issued you should be reviewing the operation of your tips and Troncs and consider how you will implement any change necessary.Do not underestimate just how complex they are,how many parts of your business they might affect and just how long they will take to bed in.22CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Headwinds andopportunitiesAlistair Rolland Managing Director,Business Restructuring 44(0)74 0782 7053 alistair.rollandbdo.co.ukScott BebbingtonSenior Manager,Business Restructuring 44(0)75 5357 7231 scott.bebbingtonbdo.co.ukHeadwinds The last several months have been especially challenging for restaurants and bars.Many of the issues we are seeing now are not new they are sustained headwinds that the sector has been facing for the last 12 to 18 months.The sector has been particularly impacted by the cost-of-living crisis which has made consumers more price-sensitive and frugal in their spending habits.Many companies continue to adopt hybrid working policies-however,workers are increasingly being encouraged back into the office and this has provided some welcome relief for town and city-centre restaurants and bars.Footfall across the sector is steady,however,disposable income remains low compared with pre-2023 levels.In the short-term,we expect that consumers will continue to stretch the value of each pound spent.Many restaurants and bars accrued substantial amounts of debt during COVID-19 due to the national lockdowns such as bounce back loans,Coronavirus Business Interruption Loan Scheme(CBILS)and even HMRC arrears.During COVID-19,Government-backed loan OpportunitiesLooking ahead,it is difficult to pinpoint exactly when the myriad of pressures will ease for restaurants and bars.In the Autumn Statement,the Chancellor confirmed that business rates relief(representing a discount of up to 75%of annual rates,capped at 110k)will be extended for a further 12 months to March 25.This will be a welcome announcement for many restaurants and bars and will provide additional breathing space.In the short-term,we encourage Management teams to undertake a detailed review of the key drivers and take robust actions to ensure their businesses are resilient for the medium to longer-term.Restaurants and bars typically have a simple working capital cycle.Whilst there may be opportunities for some businesses to negotiate better credit terms with suppliers to provide more breathing space(particularly larger operators with more bargaining power),achieving sustainable positive cashflow mostly centres around getting the trading fundamentals right-pricing,margin and overheads.schemes and forbearance from HMRC provided a vital lifeline for many businesses,however,these debts do need to be serviced and the current environment is making that increasingly more difficult.Base-rate increases,leading to increased debt servicing costs,are also further depleting cash which might otherwise be put towards debt reduction.Access to capital,either from incumbent or new funders,continues to be challenging and we are seeing many funders adopting a more risk-averse approach to the sector.With fewer options available,restaurants and bars face paying higher rates which is simply not sustainable for many.Perhaps unsurprisingly,we have seen a 66%increase in the number of pub and bar insolvencies in the last 12 months-with 725 registered corporate insolvencies in the 12 months to September 2023,compared to 438 in the prior year.It is,however,worth noting that the 12 months to September 2022 did include a period of temporary restrictions on the use of winding up petitions and landlord forfeiture proceedings,which suppressed insolvencies generally.At present,the key lever for many restaurants and bars is their cost base.Keeping a tight rein on cost is a key control for all businesses(no matter the sector)but this is even more critical during periods of adversity.Quick wins may be helpful in the short-term but,headwinds will ease in time,so management teams need to be mindful of the longer-term implications of any cost rationalisation measures.This is a balancing act-in essence,businesses need to be lean but also agile and ready to react to changes in the market.Accelerated M&A activity in the sector has been lower than anticipated,however,we expect this will increase over the next year.Restaurants and bars with cash reserves or access to growth capital are well positioned to benefit from these bolt on opportunities.Communication with key financial stakeholders such as funders or,in some cases,HMRC is also important during periods of stress or distress.We are seeing that such stakeholders are more inclined to work collegiately with Management teams if regular communication is maintained,key issues are flagged early and turnaround plans are clearly articulated.The trading environment remains challenging for the industry,but there does appear to some light on the horizon.Inevitably,not all businesses in the sector will survive,but those that are able to weather the storm should be ready to seize the opportunities that lie ahead.23CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Our sector expertiseLeisure and hospitalityAs well as restaurants and bars,our wider team has expertise across the hospitality and leisure sectors,with industry-focussed teams in retail,hotels,travel and tourism,betting and gaming,and professional sports.We have a breadth and depth of expertise across each of these industry segments,and we provide business and risk assurance,tax planning,corporate finance assistance,performance improvement advice,and personal wealth management to our clients.Restaurants,bars and pubsOur national Restaurants and Bars team comprises industry specialists across audit,tax,and advisory.We are recognised as the leading adviser to the Restaurants and Bars sector,blending sector knowledge and experience with practical advice that is aimed at making a real difference to your success.We offer expertise tailored to your business,and can resolve unique challenges that arise within the sector.With a focus on the mid-market and private equity,we frequently advise entrepreneurial businesses as they grow,and offer commercial insight that is founded on sector expertise.With our dedicated transactional team bolstering our audit and tax services,we are able to advise your hospitality business throughout its full life cycle.As thought-leaders across the sector,we offer specialised commercial and technical updates,and we have a well-established network in the industry that spans finance directors,suppliers,and advisers.We are always willing to use everything at our disposal to your advantage.24CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 2024Click here to find out more.ContactsWe hope that you enjoyed this report.For more information on our sector credentials,or to receive our thought-leadership reports in any of our other Leisure and Hospitality sectors,please get in touch.Mark EdwardsPartner&Head of Restaurants and Bars 44(0)20 7893 3742 44(0)78 0068 2917 mark.edwardsbdo.co.ukHarry Stoakes Partner,M&A 44(0)20 7893 2307 44(0)77 8557 6325 harry.stoakesbdo.co.ukTom Holt Partner,Strategy&Commercial Due Diligence 44(0)20 7486 5888 44(0)73 8593 3809 tom.holtbdo.co.ukMartyne Pearson Partner,Indirect Tax 44(0)20 7893 3218 44(0)79 7002 3325 martyne.l.pearsonbdo.co.ukConor Lambert Partner,Transaction Services 44(0)20 7893 2191 44(0)79 6859 4374 conor.lambertbdo.co.ukDavid Campbell Partner,Audit 44(0)20 7486 5888 44(0)77 7161 3951 david.campbellbdo.co.ukTim House Coo,ESG Advisory 44(0)20 7486 5888 44(0)77 7646 7671 tim.housebdo.co.ukMark Shaw Partner,Business Restructuring 44(0)20 7486 5888 44(0)78 8762 6280 mark.shawbdo.co.ukEd Green-Wilkinson Partner,Audit 44(0)20 7893 3749 44(0)79 7619 8204 ed.green-wilkinsonbdo.co.ukJonathan Hickman Partner,Tax 44(0)20 7893 2496 44(0)77 4776 7644 jonathan.hickmanbdo.co.ukJacqui Roberts Director,Employment Tax 44(0)20 3219 4062 44(0)79 8935 6240 jacqui.robertsbdo.co.ukNatasha Patel Director,Corporate Tax 44(0)20 7893 3684 44(0)79 7619 8458 natasha.patelbdo.co.uk25CATERING FOR SUCCESS|RESTAURANTS AND BARS REPORT 202424-01-3719FOR MORE INFORMATION:Mark EdwardsPartner&Head of Restaurants and Barsmark.edwardsbdo.co.ukThis publication has been carefully prepared,but it has been written in general terms and should be seen as containing broad statements only.This publication should not be used or relied upon to cover specific situations and you should not act,or refrain from acting,upon the information contained in this publication without obtaining specific professional advice.Please contact BDO LLP to discuss these matters in the context of your particular circumstances.BDO LLP,its partners,employees and agents do not accept or assume any responsibility or duty of care in respect of any use of or reliance on this publication,and will deny any liability for any loss arising from any action taken or not taken or decision made by anyone in reliance on this publication or any part of it.Any use of this publication or reliance on it for any purpose or in any context is therefore at your own risk,without any right of recourse against BDO LLP or any of its partners,employees or agents.BDO LLP,a UK limited liability partnership registered in England and Wales under number OC305127,is a member of BDO International Limited,a UK company limited by guarantee,and forms part of the international BDO network of independent member firms.A list of members names is open to inspection at our registered office,55 Baker Street,London W1U 7EU.BDO LLP is authorised and regulated by the Financial Conduct Authority to conduct investment business.BDO is the brand name of the BDO network and for each of the BDO member firms.BDO Northern Ireland,a partnership formed in and under the laws of Northern Ireland,is licensed to operate within the international BDO network of independent member firms.Copyright February 2024 BDO LLP.All rights reserved.Published in the UK.www.bdo.co.uk
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2024ANNUAL REPORTA N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry01An Introduction from the FEDIAF President 02A Message from the FEDIAF Secretary General 04Highlights from the FEDIAF Deputy Secretary General 05An Overview of Industry Numbers 06A Snapshot of FEDIAF Activity 07A Snapshot of Digital and Media Activity 08The Pet Food Industry in 2023/2024 Key Working Group Milestones 10Highlights from FEDIAF Working Groups:A.Additives and Undesirable Substances Working Group 12B.Nutrition Working Group 13C.Analytical Science Working Group 14D.Product Communication Working Group 15E.Environmental Sustainability Working Group 16F.Feed Materials and Trade Working Group 18G.Small Pets Working Group 19H.Communications Working Group 20Governance and Structure 22Committees,Working Groups and Task Force Members 23The FEDIAF Secretariat Team 27FEDIAF Membership 29Facts and Figures:A Robust Approach 32Facts&Figures European Overview 2022 33Facts&Figures by Country 34Appendix 43Glossary 44ContentsA N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry02Im delighted to introduce FEDIAFs Annual Report for 2023/2024.With the recent European Elections,it is a fitting time to reflect on yet another productive year for the Pet Food industry.Our newly released Facts&Figures featured on pages 32-43 underscore our Industrys significant role.We are responsible for producing around 10 million tonnes of pet food worth around 29.2 billion,which feeds over 350 million pets.We recognize the immense responsibility,which we take seriously.PROACTIVE ADVOCACY IS KEYOver the past year,we have been dedicated to actively engaging with EU institutions and other stakeholders in Brussels to champion and safeguard the interests of the pet food industry.FEDIAF has played a pivotal role in shaping a regulatory framework that enables our industry to thrive.Our contributions have been instrumental in safeguarding the use of Xanthan in the pet food industry,emphasising the importance of Category 3 animal fats,securing recognition of Organic Pet Food,ensuring Green Claims Packaging legislations consider pet food specific needs,and more.We are proud of our achievements and remain committed to advancing the interests of the pet food industry through proactive engagement and strategic advocacy.FEDIAF MANIFESTOIn a significant step towards proactive advocacy,we have successfully developed FEDIAFs Manifesto.This powerful tool has been designed to effectively communicate our key messages to stakeholders in a clear and concise manner.It empowers national associations to engage at the national level,amplifying our collective voice.Additionally,the Manifesto has proven to be invaluable during pre-election periods in Brussels,facilitating meaningful engagement with policy makers.This comprehensive manifesto confirms three primary focus areas,each aligned with our core pillars:guaranteeing the provision of safe and nutritious pet food,championing the pivotal role of pets in society,and fostering sustainability across the entire pet food supply chain.ENSURING THE SUPPLY OF SAFE AND NUTRITIOUS PET FOODOver the past year,FEDIAFs advocacy efforts have remained steadfast in advocating for a supportive regulatory framework for the pet food industry.We have consistently highlighted the importance of maintaining access to key ingredients,including Category 3 animal fats.Our work contributed to keeping Category 3 animal fats out of Annex 9.Alongside this work at a European level,we have supported our National Association members.We ran a workshop and provided members with a toolkit and materials to support their local endeavours.The provision of FEDIAF resources,factsheets,and guidance has undoubtedly empowered our members to proactively engage with national authorities,ensuring they stay ahead in their communications efforts.We have seen specific success stories such as work in the UK.Furthermore,the protection and reauthorization of feed additives have continued to be a key focus for the pet food industry.As we continue to navigate these regulatory challenges,we remain vigilant in advocating for policies that prioritise safety and the long-term sustainability of our industry.An Introduction from the FEDIAF PresidentThe voice of the European Pet Food Industry1970TOP PETS IN EUROPE375 15200 1895350 Founded in 1970 weve been established for over 50 yearsPromoting the views of over 375 pet food companies throughout EuropeNational Association MembersWe have over 200 Members involved in Working GroupsWere represented in 18 countriesWe represent 95%of the industryMember companiesFeeding over 350m pets!CATS129mDOGS106mORNAMENTAL BIRDS52mSMALL MAMMALS30mAQUARIA23mTERRARIA12mNUTRITIONAL GUIDANCE Working closely with the Scientific Advisory Board,FEDIAF produces the Nutritional Guidelines,which is regarded as the gold standard for manufacturers.We also produce a wide range of factsheets on nutrition topics.Follow us on Linkedin and X for regular updates.The voice of the European Pet Food IndustryFurther help and advice can be found at www.fediaf.orgMANIFESTO2Further help and advice can be found at www.fediaf.org2.Pets play an important role in society:We call on everyone,including policy makers,to recognise the benefits of pet interaction and promote responsible pet ownership.We also call for policy makers to understand the critical role that good nutrition has to play in pet welfare.166 million European households(50%)have a pet.All pets play an important role in society;they provide companionship in addition to developing unique and special bonds with their owners.As a founding member of Pet Alliance Europe,we work with AnimalhealthEurope,FVE and FECAVA to promote the many mental and physical health benefits of pet interaction via the#PetPower website,our own website,social media and events.We also promote responsible pet ownership through these channels.FEDIAF is committed to supporting the welfare needs of companion animals.We are part of the EU Platform on Animal Welfare and contribute to discussions on how nutrition can support welfare.We support the proposed companion animal welfare legislation and we will continue to disseminate guidelines from the EU Platform on Animal Welfare broadly among the stakeholders in the EU and beyond.FEDIAF is the trade body representing the European pet food industry producing 9.9 million tonnes of pet food worth around 29.2 billion.We employ around 2.5 million people(direct and indirect).We are represented in 18 European countries by 15 national trade associations and five companies.FEDIAF collaborates with a broad range of stakeholders to ensure the supply of safe,nutritious,palatable and sustainable products for over 350 million pets in Europe.We are a growing sector that has circularity at its core.We are committed to promoting responsible pet ownership,in addition to supporting the important role of pets in society.1.Safe and Nutritious Pet Food for pets across the EU:We call on policy makers to provide a supportive regulatory framework for pet food and our Industry must be considered a priority sector at all times.It is key that we retain access to energy and key ingredients such as Category 3 animal fats&feed additives.The Pet Food sector has faced severe disruption caused by geopolitical developments.Russias war in the Ukraine has impacted energy supplies in addition to the availability of raw materials,which have in turn affected the pet food supply chain.We support the Green Deal objectives.However,the race to decarbonise the transport and energy sector has unintentionally created an environment where access to key pet food ingredients,Category 3 animal fats,is endangered.They are being burned as biofuels even though this goes against the waste hierarchy principles and impacts our circular economy.The Industry also asks that feed additives are approved without disproportionate data requirements,that we are included and engaged in the regulatory process for additive review and future feed legislation updates.3.Sustainability from farm to bowl:We call on policy makers to recognise the value of the Pet Food industry in our contribution to a circular economy with the creation of a supportive regulatory environment.We also call for a harmonised approach to measuring Product Environmental Footprint and support for our packaging and sustainability goals.The Pet Food Industry is committed to the responsible use of resources and minimising our environmental impact.We proudly partnered with the European Commission during the pilot phase of the Product Environmental Footprint Category Rules(PEFCRs),which we are currently updating.Some companies already use life cycle analysis on their products to substantiate their environmental claims.We believe a harmonised and robust methodology is key in order to measure and improve our environmental impact plus it allows consumers to compare products.During Green claims directive discussions,we call on policymakers to strengthen recognition of this methodology and category rules across all EU member states to ensure a harmonized legislative approach.In terms of discussions on Packaging and Packaging Waste Regulation,FEDIAF is aligned with FoodDrinkEurope and the Flexible Packaging Initiative positions.We are broadly supportive of the Commissions approach with its objective to harmonise rules and minimise packaging and packaging waste and we engaged with MEPs to highlight the importance of ensuring pet food safety as part of the PPWR discussions in committee.We need certainty that chemical recycling will be accounted for in recycled content targets to support our circular economy.We require realistic transitional timelines for an effective system and process to be put in place.Our industry is committed to following the Reduce,Reuse,Recycle principles.FEDIAFEuropeanPetFoodManifesto12024GUARANTEEING THE PROVISION OF SAFE AND SAFE AND NUTRITIOUS PET FOODCHAMPIONING THE PIVOTAL ROLE OF PETS IN SOCIETYFOSTERING SUSTAINABILITY FROM FARM TO FORK03PROMOTING THE ROLE OF PETS IN SOCIETY Within the scope of our second pillar,FEDIAF has two primary strands of activity.Firstly,we have continued to raise awareness of the significant benefits of pet interaction and importance of responsible ownership.Our work in this area has focused on communicating the latest science and working collaboratively with our fellow Pet Alliance Europe partners.As a veterinarian myself,I was delighted that founding partners AnimalhealthEurope and FEDIAF welcomed FVE(Federation of Veterinarians of Europe)and FECAVA(Federation of European Companion Animal Veterinary Associations)to the Alliance last year.Together,we are united in our mission to champion pet welfare and underscore the positive impact of pets on the lives of all Europeans,a concept we term#PetPower.Moreover,we have emphasised the fundamental role of nutrition in pet welfare through our contributions to the feeding and watering components of proposed companion animal welfare legislation.We have highlighted that FEDIAFs Nutritional Guidelines outline all the specific nutritional requirements of pets based on their life stage,health status,and activity levels.FEDIAF takes great pride in its role in producing these comprehensive Feeding Guidelines,which are written and peer-reviewed by a Scientific Advisory Board(SAB)comprising independent board-certified veterinary nutritionistsveterinarians possessing expertise in nutrition.DRIVING SUSTAINABILITY FROM FARM TO BOWLDuring this period,we have been actively involved in discussions surrounding the Green Claims Directive and the Packaging and Packaging Waste Regulation(PPWR)proposal.Since our partnership with the European Commission in the development of Performance Environmental Footprint Category Rules for PEF(PEFCRs)in 2018,weve remained dedicated to refining this methodology,which assesses the environmental impact of pet food products across their life cycle.This takes into account the pet food industrys unique characteristics,such as the use of animal by-products.We will continue to advocate for PEFCRs,as they enable informed decision-making to improve environmental performance and facilitate consumer product comparisons,promoting sustainable purchasing habits.As for the Packaging and Packaging Waste Regulation(PPWR),while we endorse a Reduce,Reuse,Recycle strategy,its essential to ensure that reuse targets align with regulations mandating new packaging for prepared pet food,striking a balance between environmental goals and regulatory compliance.A COLLECTIVE VOICE THANK YOUAt FEDIAF,we are proud to be the collective voice of our members,comprising 15 national associations and 5 direct companies.With your support,we are able to advocate for the interests of approximately 375 pet food companies across Europe,representing 95%of the industry.Through this collective effort,we strive to make a positive impact on the lives of the 350 million pets in Europe.I would like to take this opportunity to acknowledge and express our continued appreciation for our Secretary General,Sonia Franck,who joined FEDIAF in January.Her contributions and leadership have been invaluable,and we are delighted to have her on board.I would also like to extend our gratitude to our Deputy Secretary General,Alice Tempel Costa,for her exceptional contribution throughout 2023.Her dedication and expertise have played a significant role in our success.Working alongside the Secretariat team,including Aleksandra Prandota and James Ramsay,has been a pleasure.Our Annual Report offers a comprehensive overview of the initiatives organized within FEDIAFs Working Groups,committees,and task forces.We highly value your expertise and involvement in these groups,and we encourage anyone interested in joining to reach out to our team.Thank you all for your continued support,dedication and contributions and we look forward to another productive year.ROSA CARBONELLPRESIDENT,FEDIAF352mPETSIN EUROP EA N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry04In my esteemed role as the Secretary General of FEDIAF EuropeanPetFood,since assuming office in January,I have been privileged to embark on a remarkable and transformative journey within the dynamic Pet Food Industry.I extend my deepest appreciation to our President,Rosa,and our committed members for their warm embrace.I am also truly grateful to my colleagues and the spirit of collaboration within our Secretariat.A significant milestone in our transformative journey was the unveiling of our Manifesto in April.This was a moment of shared pride and purpose,uniting Rosa,myself,and the distinguished members from the Communications Working Group.The choice of Brussels as the venue was not just symbolic;it was a testament to our commitment to championing our industry.Delving into the essence of our extensive member network has been an enlightening voyage.Through virtual dialogues on Teams and immersive visits to our members diverse offices and production facilities,each encounter has provided deep insights into the resolute commitment and unified ethos that define the essence of the Pet Food Industry.In addition to my role at FEDIAF,Im honoured to serve as the Chair of Pet Alliance.This platform is crucial for advocating pet welfare,highlighting the bond between companion animals and humans,and their role in society.Its also an opportunity for us to partner with key organizations like AnimalHealth Europe and veterinary associations FVE and FECAVA.The upcoming elections at the EU level present a valuable opportunity for us to strengthen our connections and advocate for the needs of our industry at a broader legislative level.Harmonious collaboration forms the cornerstone of our mission to amplify the harmonized voice of our industry across Europe.I am filled with a profound sense of anticipation and commitment to advancing the collective interests of our members and elevating the Pet Food Industry.As a formidable,united front,we pledge to continue our pursuit to enhance the lives and well-being of Europes cherished 352 million pets,envisaging a future of vitality,health,and shared prosperity.SONIA FRANCKSECRETARY GENERAL,FEDIAFA Message from the FEDIAF Secretary General05Highlights from the FEDIAF Deputy Secretary GeneralThis year has been exceptionally busy for the FEDIAF Secretariat and I would like to thank our members for their invaluable expertise and support throughout 2023 and recent months.Reflecting on the past year,there have been numerous highlights,and within the following pages,youll find a comprehensive overview of our activities.Pages 6-9 provide a snapshot of our industry and FEDIAF events,insights into the production of new materials,our digital initiatives and feature articles.Following that,pages 10-11 offer a glimpse into the notable achievements of each working group.As many of our members are aware,FEDIAF operates with seven technical working groups,each with its unique focus:additives,analytical science,nutrition,product communication,environmental sustainability,feed materials and trade and small pets.With approximately 200 members actively contributing across these groups,along with subgroups and task forces addressing specific mandates like animal welfare under Communications WG,we are immensely grateful for the technical expertise and dedication demonstrated by our chairs and members.We extend an open invitation to any interested members to join these efforts by reaching out to us via fediaffediaf.org.Engaging in this rewarding work collectively propels our industry forward,aligning with the goals outlined in our pillars and Manifesto.Together,through collaboration and dedication,we continue to advance the Pet Food Industry towards a brighter,more sustainable future.ALICE TEMPEL COSTADEPUTY SECRETARY GENERAL,FEDIAFA N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry06FEDIAF EuropeanPetFoodA Snapshot of Industry Numbers1970375 15200 1895350 Founded in 1970 weve been established for over 50 yearsPromoting the views of over 375 pet food companies throughout EuropeNational Association MembersWe have over 200 Members involved in Working GroupsWere represented in 18 countriesWe represent 95%of the industryMember companiesFeeding over 350m pets!07Further help and advice can be found at www.fediaf.org2.Pets play an important role in society:We call on everyone,including policy makers,to recognise the benefits of pet interaction and promote responsible pet ownership.We also call for policy makers to understand the critical role that good nutrition has to play in pet welfare.91 million European households(46%)have a pet.All pets play an important role in society;they provide companionship in addition to developing unique and special bonds with their owners.As a founding member of Pet Alliance Europe,we work with AnimalhealthEurope,FVE and FECAVA to promote the many mental and physical health benefits of pet interaction via the#PetPower website,our own website,social media and events.We also promote responsible pet ownership through these channels.FEDIAF is committed to supporting the welfare needs of companion animals.We are part of the EU Platform on Animal Welfare and contribute to discussions on how nutrition can support welfare.We support the proposed companion animal welfare legislation and we will continue to disseminate guidelines from the EU Platform on Animal Welfare broadly among the stakeholders in the EU and beyond.FEDIAF is the trade body representing the European pet food industry producing 10.5 million tonnes of pet food worth around 29.1 billion.We employ around 1 million people(direct and indirect).We are represented in 18 European countries by 15 national trade associations and five companies.FEDIAF collaborates with a broad range of stakeholders to ensure the supply of safe,nutritious,palatable and sustainable products for over 340 million pets in Europe.We are a growing sector that has circularity at its core.We are committed to promoting responsible pet ownership,in addition to supporting the important role of pets in society.1.Safe and Nutritious Pet Food for pets across the EU:We call on policy makers to provide a supportive regulatory framework for pet food and our Industry must be considered a priority sector at all times.It is key that we retain access to energy and key ingredients such as Category 3 animal fats&feed additives.The Pet Food sector has faced severe disruption caused by geopolitical developments.Russias war in the Ukraine has impacted energy supplies in addition to the availability of raw materials,which have in turn affected the pet food supply chain.We support the Green Deal objectives.However,the race to decarbonise the transport and energy sector has unintentionally created an environment where access to key pet food ingredients,Category 3 animal fats,is endangered.They are being burned as biofuels even though this goes against the waste hierarchy principles and impacts our circular economy.The Industry also asks that feed additives are approved without disproportionate data requirements,that we are included and engaged in the regulatory process for additive review and future feed legislation updates.3.Sustainability from farm to bowl:We call on policy makers to recognise the value of the Pet Food industry in our contribution to a circular economy with the creation of a supportive regulatory environment.We also call for a harmonised approach to measuring Product Environmental Footprint and support for our packaging and sustainability goals.The Pet Food Industry is committed to the responsible use of resources and minimising our environmental impact.We proudly partnered with the European Commission during the pilot phase of the Product Environmental Footprint Category Rules(PEFCRs),which we are currently updating.Some companies already use life cycle analysis on their products to substantiate their environmental claims.We believe a harmonised and robust methodology is key in order to measure and improve our environmental impact plus it allows consumers to compare products.During Green claims directive discussions,we call on policymakers to strengthen recognition of this methodology and category rules across all EU member states to ensure a harmonized legislative approach.In terms of discussions on Packaging and Packaging Waste Regulation,FEDIAF is aligned with FoodDrinkEurope and the Flexible Packaging Initiative positions.We are broadly supportive of the Commissions approach with its objective to harmonise rules and minimise packaging and packaging waste and we engaged with MEPs to highlight the importance of ensuring pet food safety as part of the PPWR discussions in committee.We need certainty that chemical recycling will be accounted for in recycled content targets to support our circular economy.We require realistic transitional timelines for an effective system and process to be put in place.Our industry is committed to following the Reduce,Reuse,Recycle principles.FEDIAFEuropeanPetFoodManifesto12024FEDIAF,the European Pet Food Association,welcomes the European Commissions proposalon the revision of the Packaging and PackagingWaste Regulation(PPWR).Pet food packaging is critical to ensure pet foodis kept safe and retains its nutritional quality.Packaging also provides pet owners withimportant factual and legal information aboutthe food they are purchasing for their pet.Pet food packaging comes in a variety of formats,including pouches,cans,bags and trays.There aredifferent materials used in their formulationranging from paper and cardboard to plastic andaluminium.Manufacturers carefully select the bestoption in order to ensure freshness,hygiene,safetyand sustainability.FEDIAF members are fully committed to reducingthe environmental impact of pet food packaging.The pet food industry has been making progress toreduce and optimise the use of packagingmaterials,find balanced and efficient alternativesto non-recyclable plastic and increase the use ofrecycled content.These efforts are part of ouractive contribution to tackling climate change andreducing waste.FEDIAF POSITION PAPER Packaging&Packaging Waste RegulationArticle 4,which stresses on the importance offree movement of packaging across the EU.Article 11.1,which sets up harmonised sortinglabels across the EU,allowing consumers toproperly sort their packaging which willcontribute to improving recycling rates.Article 6,which supports the development of aharmonised definition of recyclable packagingat EU level.Article 43,which mandates for all packaging(including flexibles)to be collected.Article 6.11,which plans for EPR fees to be eco-modulated on the basis of the recyclabilityperformance grade.FEDIAF is keen to highlight the key policy pointsfrom PPWR that will ensure pet food safety,essential to the health and welfare of over 300million pets in the EU,alongside broader policyobjectives aiming to harmonise rules andminimising packaging and packaging waste.FEDIAF is aligned with the Flexible packaginginitiative,and we welcome the overall ambitionof the proposed Packaging and Packaging WasteRegulation.We strongly support:FEDIAF is committed to providing companion animals with quality,safe and nutritious food in order to meet their welfare needs.FEDIAF POSITION PAPER Companion Animal Welfare RAISING NUTRITIONAL STANDARDS FEDIAF believes that companion animal welfare starts with great quality nutrition and,as anindustry,we are committed to providing high quality,nutritious and safe pet food for over 300million pets in the EU.This is a responsibility that we take very seriously.FEDIAF produces the go-to Nutritional Guidelines for the petfood industry,which helps raise standards throughout Europe.This harmonised reference document focuses on dog&catnutrition and is developed by a Scientific Advisory Board(SAB)ofindependent board-certified veterinary nutritionists(veterinarians with an expertise in nutrition).The SAB interpretsand evaluates the latest scientific research to ensure the petfood guidance is kept up to date.The Nutritional Guidelines provide clear detail on how toresponsibly feed pets.It enables the Pet Food Industry toachieve a balanced regulatory environment for the production ofnutritious and safe food and demonstrates how the Industry iscommitted to continuously raising the bar across industry.FEDIAF EuropeanPetFoodA Snapshot of FEDIAF Activities799200 100 125 Technical Working Groups and Communications*IncludingAnimalWelfare,PARNUTS,Category3,Organics,Nano,NutritionSAB,FactsheetSubgroupandtwoPEFCRgroups.*CombinedwithGAPFACongress.Task Forces and Subgroups*Events where the Secretariat Participated as Guest SpeakerAttendees at Annual Congress and AGM*Guests attended#PetPower eventManifesto LaunchedArticles and positions publishedA N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry088500 2000Linkedin followersNew followers in one year( 30%)Pets International Feed Navigator European Supermarket Magazine Feed Additives Pet Food Processing All Pet Food EspeciesPRO Pet Food IndustryCOVERAGE IN KEY PUBLICATIONS SUCH AS:FEDIAF EuropeanPetFoodA Snapshot of Digital&Media Activity09A N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry10The Pet Food Industry 2023/24Key Working Group MilestonesFEDIAF is one voice working on behalf of the Pet Food Industry across Europe and has many achievements,which are possible due to the collaboration of its members.Here we highlight a few of these milestones by Working Group:11ADDITIVES&UNDESIRABLE SUBSTANCES WORKING GROUP FEDIAF successfully secured a positive EFSA opinion for Propyl gallate,completed tolerance studies for BHT&Xanthan gum in cats and agreed the outline for 4 further critical tolerance studies.In addition following several meetings with DG SANTE,we managed to have flexibility for the industry with regards authorization of Xanthan gum(cats)and Locust bean gum(cats and dogs),protecting the industry from critical ingredient loss and costs in excess of 200M.NUTRITION WORKING GROUP FEDIAF and FEDIAFs Scientific Advisory Board held two highly successful in person meetings in 2023,following a pause due to the pandemic.These meetings provided the industry and FEDIAFs independent Nutrition experts a unique opportunity to meet and exchange on the most up to date science in the field of Cat and Dog nutrition.Prof.Giacomo Biagi from the Department of Veterinary Medical Science,University of Bologna was elected as the vice Chair of the Scientific Advisory Board.ANALYTICAL SCIENCE WORKING GROUP The group has been actively driving industry recommendations on the development of analytical methods and is working on developing a gold standard method to measure acrylamide in pet food.PRODUCT COMMUNICATION The publication of Regulation 2023/2419 On the labelling of organic pet food,published in October 2023,takes into consideration the idiosyncrasy of pet food and provides specific labelling rules,very similar to the human food rules.ENVIRONMENTAL SUSTAINABILITY WORKING GROUPThe group focused on the packaging and packaging waste regulation(PPWR)proposal,the Green Claims Directive proposal,and oversaw the PEFCR update.The group also has oversight on the FEDIAFs Task Force on Category 3 animal fats.FEED MATERIALS AND TRADE WORKING GROUP The group monitored the developments and highlighted opportunities for improving cross border trade(with a special focus on post Brexit trade and mitigation of new barriers).FEDIAF presented the positions of the WG to the European Commission,DG TRADE and stakeholders such as FoodDrinkEurope.SMALL PETS WORKING GROUPThe Small Pets Working Group continued work on nutritional guidelines for rabbits and ornamental fish.These guides will be expanded in 2024 to include guinea pigs and,later,pet birds.COMMUNICATIONS WORKING GROUP The Communications Working Group led the development of a Manifesto in advance of European Elections.This important document outlines the Industrys asks of policy makers and stakeholders.We also welcomed two new partners to the Pet Alliance so we now work closely with AnimalhealthEurope,FVE and FECAVA to promote#PetPower.A N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry12A.Additives and Undesirable Substances Working GroupINTRODUCTION FEDIAFs Additives and Undesirable Substances Working Group includes European industry experts on legislation governing feed additives and undesirable substances.The team also has expertise in key functional areas such as chemistry,toxicology,safety testing and business understanding.The challenges the group face are dynamic and of high impact for our industry,requiring a strong commitment and excellent team work from members and secretariat throughout the year.Additives are an essential component in offering safe,stable and nutritionally balanced diets to pets across Europe.They are also key to ensuring products achieve the high levels of pet and owner acceptance in terms of flavour,texture and appearance that enables the European pet food business to thrive.Only additives that have adhered to the strict authorization/reauthorization/renewal processes of the EU are permitted for use.The working group continuously engages with the European Commission,the European Food Safety Authority(EFSA)and industry partners including other trade associations to ensure that key ingredients are thoroughly assessed with the best possible body of evidence.Similarly,Undesirable Substances are a constant threat in a world where ingredients are increasingly sourced globally.FEDIAF,in association with the EU Commission and EFSA,are constantly vigilant to emerging legislative change.We work to understand the impact and respond on behalf of the EU pet food industry.OBJECTIVES Ensure the safety and utmost quality of every ingredient used in pet food.Enable excellence in safe and balanced nutrition through maintaining access to key nutritional,sensory and technological feed additives.Encourage freedom for our members to innovate through access to additives designed to maximise pet and owner experience through all five senses.ACHIEVEMENTSAdditives:Successful collaboration across the industry has been fundamental in the achievements of this working group.FEDIAF successfully secured a positive EFSA opinion for Propyl gallate.FEDIAF also met DG SANTE to explain our progress and challenges on the Xanthan guam and request flexibility for the industry with regards authorization of Xanthan gum(cats)and Locust bean gum(cats and dogs),protecting the industry from critical ingredient loss and costs in excess of 200M.Strong applicant outreach results in FEDIAF taking control of Locust bean gum dossier and collaborating to secure future of acacia gum.Collaboration is key in the working group,with a broad range of members offering the expertise of their respective companies and access to their research facilities to create test diets,evaluate product acceptance and obtain analytical results to support the goals of FEDIAF.It is the development of this interdisciplinary,cross-functional and international collaboration that has delivered the results of which we are proud.13B.Nutrition Working GroupINTRODUCTION One of FEDIAFs main objectives is to safeguard the wellbeing of pets by ensuring its member companies provide well-balanced and nutritionally sound pet food.To achieve this goal,FEDIAFs experts work together with a Scientific Advisory Board(SAB)that includes independent and renowned board-certified veterinary nutritionists from across Europe.The SAB advises on the scientific standards of the recommended nutrient levels,which are incorporated in FEDIAFs Nutritional Guidelines.FEDIAF is regularly updating the recommendations for nutrient levels in pet food based on the latest peer-reviewed science,in close cooperation with the SAB.This enables the pet food industry to adjust the nutritional quality of complete diets for dogs and cats according to state-of-the-art scientific knowledge.OBJECTIVES Contribute to the wellbeing of pets by ensuring the manufacture of nutritious and palatable food reflecting the most recent developments in scientific knowledge.Ensure FEDIAF Guidelines are the go to document on pet nutrition in Europe and beyond.Ensure a level playing field and enhance scientific cooperation between pet food manufacturers,petcare professionals and competent authorities.ACHIEVEMENTS Safety of Phosphorus in cats The FEDIAF Nutrition Working Group(NWG)is actively engaged in the scientific discussion around high intake of inorganic phosphorus compounds(such as NaH2PO4)and effects on indicators of kidney function in cats in collaboration with broadly recognized vet and pet nutrition experts in the field.Together the NWG and SAB reviewed the latest research on this topic published by Reynolds and colleagues.This new study provides additional support to the level of inorganic Phosphorous mentioned in the footnote in the Nutritional Guidelines.The paper will be included in the updated FEDIAF Nutritional Guidelines to be published in 2024.FEDIAF participated as a sponsor at the ESVCN congress in Vila Real,PortugalThe 27th Congress of the European Society of Veterinary and Comparative Nutrition(ESVCN)Congress was held September 7th to 10th 2023 in Vila Real,Portugal.Leading the congress organisation this year was SAB member Prof.Ana Loureno.FEDIAF continued its annual sponsorship of this congress and was present with a booth providing hard copies of the Nutritional Guidelines,as well as the Labelling Guide,and a selection of FEDIAF factsheets for attendees.The provision of materials was well appreciated by participants.The annual ESVCN provides another opportunity for many of the FEDIAF NWG and FEDIAF SAB to meet and engage with members of the ESVCN.Initiation of collaborative work between SAB and NWG on creating new pet food fact sheets SAB members together with NWG members have formed small working groups to work on new pet food fact sheets in the area of grain-free diets,insect based ingredients in pet food and the awareness about obesity incidence,risk factors and the need for weight management.1 Reynolds BS,Chetboul V,Elliott J,Laxalde J,Nguyen P,Testault I,Dorso L,Abadie J,Lefebvre HP,Biourge V.Long-term safety of dietary salt:A 5-year Prospective randomized blinded and controlled study in healthy aged cats(PEANUT study).J Vet Intern Med.2024 Jan-Feb;38(1):285-299.doi:10.1111/jvim.16952.Epub 2023 Dec 12.PMID:38084870;PMCID:PMC10800216.Further help and advice can be found at www.fediaf.orgInsect-based ingredients in pet foodAs always,the most important factor in feeding our pets is giving them a complete and balanced diet,appropriate for their species and life-stage.When used in into complete pet food,insect1 proteins and lipids(fats)can contribute to nutritious and palatable pet food that can also be environmentally sustainable(Fera and Minerva,2019).While there is a wide range of pet food products to choose from,those containing insect-based ingredients help broaden the choice of non-traditional pet foods on offer to pet owners.COMMON TYPES OF INSECTS USED IN PRODUCTION OF FEEDThere are currently seven species of insects that are authorised in the EU for use in pet food2.The top three most prevalent species of farmed insects for use in pet foods are illustrated below.WHAT IS UNIQUE ABOUT INSECTS?Insects are able to eat by-products and foods that are surplus to human requirements and efficiently convert them into quality proteins and produce valuable by-products such as chitin and insect oil.This biological re-processing of by-products is the key concept underpinning the use of insect protein in animal feeds.Moreover,the excrements of insects,so called insect frass,can be used as a natural fertilizer.DIFFERENT FORMS OF INSECT-BASED INGREDIENTSThe insects are mainly rendered into high protein meal(e.g.55%protein with an average 80%digestibility)(Bosch et al.2020)and fats,or made into puree which is stored frozen.Whole dried insect alternatives are available,but these are mainly targeted at the bird and fish market.Currently,over 50%of insect production is being directed towards pet food.According to a RABO Bank report,the demand for insect protein is predicted to rise from 120,000 metric tons to half a million metric tons by 2030(De Jong&Nikolik 2021).INTERESTING FACTS Farmed insects are typically fed on a variety of plant-based diets,such as spent brewery grains,fruits,vegetables,and other vegetable or cereal by-products.The initial farms mainly began in the tropics but now span the globe.Today,there are over 100 farms in European countries such as Germany,The Netherlands,France,Poland,Belgium,and UK.Black soldier fly(BSF larvae)(Hermetia illucens)Yellow mealworms(Tenebrio molitor)House crickets(Acheta domesticus)103/24The voice of the European Pet Food IndustryNUTRITIONAL PROFILE&POTENTIAL ADDED BENEFITS Insects such as black soldier fly larvae are rich in protein and have a clear potential in animal nutrition.Additionally,insects can have high concentration of fats,minerals,and vitamins,depending on what they are fed and on their larval stage at the time of harvest(picture below).A gram of edible protein from beef requires 8-14 times more land and 5 times more water than a gram of protein from mealworms and has a higher environmental impact with respect to greenhouse gas emissions.Broiler chickens are associated with 1.3-2.7 times higher emissions,and beef cattle emit 6-13 times more CO2 equivalents than mealworms,when measured in terms of 1 g of edible protein(Oonincx and De Boer 2012).As processing and insect feed is producer-dependent and technology is evolving rapidly,using suppliers primary data is recommended when evaluating their environmental impact.Insects are also efficient feed converters,depending on their species and the diet consumed.Mealworm and house crickets have been reported to convert some feed sources into body mass with similar efficiency to poultry(Oonincx et al.2015).In conclusion,insects provide a sustainable source of animal protein,and producing valuable by-products such as chitin and insect oil.CONSUMER ATTITUDE AND ACCEPTANCE LEVELMarket research work undertaken by PROteINSECT(2016)indicated that a high percentage of consumers demonstrate acceptability of insects as a protein source in animal feed3.Consumers also showed a desire for more information about insects as an alternative sustainable protein source.Growing media attention and campaigns by farmers,academics,non-profit organizations(such as IPIFF4)and pet food companies are helping to increase acceptability of insect-based ingredients among pet professionals and owners.The increased acceptability of insect-based pet food ingredients has been further bolstered by research which indicates that insects are a nutritious source of protein and other essential nutrients,as well as potentially being more sustainable than conventional meat sources for pet food.More research and long-term studies are needed to substantiate these findings.Please check our website for a full list of FEDIAF Fact sheets and Position Papers.PALATABILITYStudies show that cats and dogs may have different tastes when it comes to insects,and that the type of insect and the amount included can affect the food acceptability.Test reports by pet food companies showed that dogs may favour dry foods with black soldier fly larvae meal over those with yellow mealworm meal(YMW),while cats may favour the YMW-based food over foods with black soldier fly larvae meal(Bosch et.al.2021).ENVIRONMENTAL BENEFITS Insects require significantly fewer resources than traditional livestock.Life cycle assessment studies indicate that insect proteins can have a lower environmental impact(eg.,lower land use,lower water use,less emission of CO2-equivalents)than animal proteins from ruminants,pigs,and poultry when produced using renewable energy and fed with agricultural by-products(Van Huis and Oonincx 2017).These environmental impacts may further diminish as production facilities scale up and increase their capacity in coming years.LIFE CYCLE OF A FLYEGGSLARVAADULTPUPARegulatory information on this topic can be found at:https:/ipiff.org/insects-eu-legislation-general2 Further help and advice can be found at www.fediaf.orgA N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry14C.Analytical Science Working GroupINTRODUCTION FEDIAFs mission is to facilitate the supply of safe and nutritious products.The importance of analytical methods continued to evolve through challenges prompted by changes in the regulatory landscape,external reports on contaminants or nutritional parameters.Additionally,the need for a clear view of method robustness or level of applicability to the additives re-authorization process remains present.The working group on Analytical Science has developed to be a reference point for all topics and questions related to analytical methods.OBJECTIVES One of the Groups missions is to provide internal advice to other working groups.In collaboration with the Nutrition Working Group,the group continued to provide expertise,views and opinions on an analytical method to measure inorganic Phosphorus developed by the University of Munich,to provide a reliable method for future reference.A second workstream that is being developed is in collaboration with the Additives Working Group,regarding analytical methods of gelling agents,which is a vital topic for the industry in general and FEDIAF specific.ACHIEVEMENTSDriving Industry recommendations on the developments and use of analytical methods The Analytical Science Working Group will actively drive industry recommendations on the development and usage of analytical methods,and in this area the group is working on a roadmap for developing a gold standard method to measure acrylamide in pet food.Providing expertise on analytical methods to the IndustryThe Analytical Science Working Group continued to provide significant expertise relevant to the industry based on increasing engagement and participation in this workgroup,and the aim is to continue building position and output of the Analytical Science Working Group.15D.Product Communication Working GroupINTRODUCTION The Product Communication Working Group comprises experts in the field of labelling and product communication.The team has excellent technical and legal expertise.Pet Food Product Communication has been evolving over recent years.From a very simple pack with minimal information(mainly limited to mandatory declarations)to current product communication,which involves,not only more content-rich packs,but also TV-advertisements,complementary on-line information,colourful leaflets,etc.In the last year,this working group has acted to ensure that the key priorities were tackled and well-represented to policymakers.Pet food,although under feed regulation,has its own specificities,which FEDIAF has to ensure are taken into account by the EU authorities.OBJECTIVES Organic Regulation In order to avoid disruption of the EU organic pet food business,FEDIAF identified two issues:The addition of essential additives to the list of EU authorised additives for organic feed.This has been achieved after the publication of Regulation 2023/121.Specific organic feed labelling rules for pet food:as most pet foods are complete(i.e.all nutrients need to be included into the product)the organic feed rules would make it almost impossible to label organic pet foods,thus adapted specific rules for pet food would be needed.ACHIEVEMENTS Organic Regulation The publication of Regulation 2023/2419 On the labelling of organic pet food,published in October 2023,takes into consideration the idiosyncrasy of pet food and provides specific labelling rules,very similar to the human food rules.This achievement,resulting from almost 3 years of intense work,both by the secretariat and by a dedicated task force,will allow the pet food industry to continue growing the organic pet food business,without disruption and following a smooth transition from national rules to EU regulation.Code of Good Labelling PracticeThe Code of Good Labelling Practice for Pet food,endorsed by the EC,is a living document and needs to be maintained.After the publication of the Regulation on organic pet food labelling,this new legal piece needs to be incorporated into the Code.Together with the latest Regulation on Feed for Particular Nutritional Purposes(PARNUTS),which will require an update on the chapter about these products labelling and other minor regulatory updates will generate a new updated version of the Code.This updated Code will help manufacturers to properly communicate their products to consumers and consumers will have a standardize labelling which will ease their buying decision.A N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry16E.Environmental Sustainability Working GroupINTRODUCTION FEDIAFs Environmental Sustainability Working Group(ESWG)has been an integral part of FEDIAF since 2019,working with decision-makers around Europe and is a trusted voice on sustainability issues in the pet food sector.In 2023,FEDIAF built upon its role as a responsible stakeholder in the EUs Green Deal debate and worked towards better regulation in packaging and packaging waste,and on the substantiation of environmental claims while continuing to work on pilot projects with the JRC(Joint Research Council)and experts on PEF(Product Environmental Footprint).OBJECTIVES Promote the responsible use of resources from farm to bowl and minimise the sectors environmental impact whenever possible.Collaborate with authorities,regulators,academics,and other related stakeholders and contribute efficiently to policy shaping.Ensure that a favourable framework for more sustainable pet food production is adopted.ACHIEVEMENTS Packaging legislative framework As in previous years,FEDIAF requested via a letter to DG GROW and DG ENVI to intervene against any national provisions on packaging that fail to comply with the EU Single Markets principles.The lack of harmonization is an important issue to our members and we kept monitoring the different initiatives at National and European Commission level.In 2022,the European Commission published its proposal for the Packaging and Packaging Waste Regulation(PPWR)(an update on the earlier directive PPWD)in order to harmonize legislation across Member States.In April 2023,FEDIAF,alongside more than 120 packaging industry organisations co-signed a joint letter urging co-legislators to preserve,in its entirety,the internal market legal basis of the PPWR,confirming this was the best way to achieve the environmental and economic objectives of the proposal.The Commission proposal has now been amended by both EU Parliament and Council,and a joint text has been agreed.Parliament has formally adopted the agreement and when Council adopts the text later in 2024,the proposals will become law.FEDIAF has continued to assess this proposal throughout and has given MEPs voting advice,our industrys position,and wider advocacy through engagement with our umbrella organization,FoodDrinkEurope,and the EU packaging chain forum.Our advocacy played a part in removing amendments from the plenary vote,which would have had a significant impact on our sector regarding reuse targets due to the inconsistency with Regulation 142/2011,which requires that processed pet food must be packaged in new packaging.FEDIAF members are committed to achieving the objectives defined by PPWR.The European Commission proposal is a great opportunity to encourage harmonization across the EU and we thank decision-making bodies for having taken into account the interests of the 90 million pet keeping households in the EU.FEDIAF,the European Pet Food Association,welcomes theEuropean Commissions proposal for the Green Claims Directive.Throughout the Commissions consultation process,FEDIAF hassought to be a constructive partner.As such,FEDIAF acknowledges the need for clear legislationregarding Business to Consumer marketing claims of anenvironmental nature as part of fair commercial practices in theSingle Market.We support the development of an EU-harmonisedlegislative framework which should set minimum requirements forthe voluntary provision of product environmental information.FEDIAF POSITION PAPER Green Claims DirectiveTo support harmonisation,FEDIAF had expressed the view,prior to the publication of this proposalthat legislation would best be framed as a Regulation,rather than a Directive.A Regulation wouldensure environmental claims to be substantiated in a harmonised way across the EU thereby leadingto greater consumer reliability,clarity and trust.Article 2:Avoid divergence in definitions between the Green Claims and the Empowering Consumersfor the Green Transition directive proposals.These two legislative proposals should be fully aligned toavoid confusion and different interpretations between member states.Article 3:FEDIAF has previously advocated for a uniform and robust methodology in the EuropeanUnion,such as the Product Environmental Footprint(PEF)for Pet Food.We believe that with PEFCRswe have achieved:a robust,credible and comparable methodology allowing operators to assess and communicatethe environmental impact of their products;a methodology that can be verified homogenously across EU members states in order to ensureenvironmental footprint claims are properly substantiated;a methodology that provides a wide view of different environmental impacts;a methodology that can increase the level of confidence in green claims among consumers,supporting in this way the Green Transition.Continued on next pageFEDIAF and its members have proudly participated during the pilot phase,in partnership with theEuropean Commission,in the development of a methodology(Product Environment Footprint)tosubstantiate environmental footprint claims in a verifiable and comparable way across the EU.Webelieve this has the potential to increase the level of consumer confidence to support the GreenTransition.It will facilitate a level playing field among companies in the Single Market andencourage more sustainable production and consumption.In light of this,FEDIAF is calling for EU decision makers to consider the following:FEDIAF|Rue de LIndustrie 11,box 10|B-1000 BRUXELLES|www.europeanpetfood.orgFEDIAF FACTSHEET -PEFCRs explainedEnsuring robust substantiation&guaranteeing crediblecomparability of Green claims for consumers.What is the PEF method?The PEF(Product Environmental Footprint)method is a LCA(Life CycleAssessment)methodology developed by experts and validated by theEuropean Commission to quantify the environmental impacts ofproducts.This assessment covers 16 impact categories of a productincluding:ecosystems,climate,natural resources,water and humanhealth.Visit the EC website for more information.As a result,it helpsidentify the biggest impact areas in a products life cycle and adaptrecipes to track and improve environmental performance of products.LCA How did the Petfood Industry pioneer this approach?Our sector was proud to partner with the European Commission in a pilot project to support the development ofCategory Rules for PEF(PEFCRs),which were endorsed in 2018.Since then,we have been committed tosupporting,developing and updating this methodology in order to support the European Commissionssustainability strategy and the development of an EU harmonised legislative framework.How does this approach benefit consumers?This harmonised and endorsed approach will enable consumers to make proper comparisons betweenproducts,simplifying their lives and resulting in a shift towards more sustainable buying patterns.An officialand recognized methodology used across industry and Europe will also enhance trust among consumers.This endorsed methodology takes into account the unique aspects of the pet food industry,such as theuse of animal by-products.These ingredients are not used for human consumption but they are a greatsource of nutrients for the petfood industry.Independent experts and the European Commission agreethat the most relevant approach for calculating the environmental impact of these ingredients is theeconomic allocation.The petfood industry has different formats and petfood PEFCR considers the calculations for the mainsub categories.This supports product development in the petfood industry by helping to identifyimpactful areas in a products life cycle,to adapt recipes and to track and improve the environmentalperformance of products.Why are Petfood PEFCRs so important for our Industry?The Petfood industry is advocating for the Green Claims directive to acknowledge thePetfood PEFCRs as the standard calculation methodology for substantiating environmentalimpact claims related to petfood.17Green Claims Directive FEDIAF had hoped that the EU Commission would propose a Regulation on the substantiation of environmental claims,but in March 2023,the Commission proposed a Directive instead.Our concern has been that,left to member states implementation of a Directive,the industry would be faced with a patchwork of differing laws and schemes.The ESWG drafted a position paper calling for a harmonized approach to legislation and the adoption,where possible,of an accepted approach to benchmarking and verifying environmental claims.FEDIAF believes that where Produce Environmental Footprint Category Rules(PEFCRs)have been developed in a sector,that should become the benchmark for any claims made.FEDIAF has contacted MEPs on the ENVI and IMCO committees in the European Parliament to make recommendations on improving the proposed text and circulated our Position Paper calling for robust substantiation&credible comparability of Green claims for consumers.Product Environmental Footprint Category Rules(PEFCR)for the pet food industry The validation of the PEFCR in 2018 was a milestone for FEDIAF and members.PEF is a credible,robust and accessible methodology that was developed to help members to assess the environmental impact of their pet food products.Early in 2023,FEDIAF received a new dataset provided by the European Commission in order to proceed with the update of its PEFCRs.FEDIAF organized its Technical Secretariat and External Independent Review Panel in 2023,which includes LCA,Industry and NGO experts.The review of the PEFCR in the pet food sector is now near completion and should be agreed Q3 2024.In March FEDIAF hosted a webinar on thePEF,with FEFAC,UK Pet Food and Wageningen University as guest speakers.FEDIAF also co-signeda letter to DG SANTEto reiterate strong support for the Product Environmental Footprint(PEF)methodology in view of upcoming Green Claims proposal from the European Commission.Protecting Category 3 Animal Fat by-productsAs part of the European Green Deal,the EU adopted even more ambitious climate goals,setting a target of-55%greenhouse gas(GHG)emissions by 2030 and a long-term goal of net zero GHG emissions by 2050.FEDIAF welcomes the ambitious climate package and supports mainstreaming of renewable energy across all economic sectors.The EU institutions finalized the text of the Renewable Energy Directive Re-Fuel proposals in the spring of 2023 focusing on the use of sustainable fuels in aviation and maritime transport.This directive will now need to be implemented in EU member states legislation.During the discussions,FEDIAF members worked intensively on this issue.We had identified a serious risk for the sustainability of our industry with regards the carbonization of transport:the use of Category 3 fats by-products(CAT 3)as biofuels.CAT 3 by-products are key ingredients to produce pet food.FEDIAF firmly believes that food,not intended for human consumption,should be used in pet food first,which sits well above energy use in the EUs own waste hierarchy.Other types of animal fats,such as animal by-product category 1 and 2 animal fats,which do not meet the necessary standards for use in pet food,due to safety reasons,are much more suitable for use in biofuels.Unfortunately,the failure to safeguard Category 3 animal fats from use in EU biofuels could trigger a higher carbon footprint for the pet food sector,as less sustainable feedstocks might be used to fill the gap.In 2023,FEDIAF organised a workshop on Category 3 animal fats for National Associations,sharing the toolkit for use in member states.FEDIAF also met with key stakeholders and we developed several articles,a video,press releases and joint statements with the aim of educating policy makers about the impact these different files might have on the pet food sector.FEDIAF will continue to advocate for Category 3 by-products to be used according to the EU material waste hierarchy criteria,which is in line with the Circular Economy ambitions of the EU.A N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry18F.Feed Material and Trade Working GroupINTRODUCTION The Feed Material and Trade Working Group comprises industry experts with a specific focus on plant and animal derived raw materials plus a knowledge of trade and its potential restrictions.The rules for animal derivatives are covered by the Animal By-Products Regulations.There are over 350 pages of stringent rules and provisions safeguarding human and animal health,in addition to establishing the legal framework for sourcing safe raw materials for our industry,which requires every proposed amendment to be scrutinised very carefully to ensure that it is acceptable for the pet food industry.The working group follows parallel regulatory developments in the UK to support frictionless trade.As the closest 3rd country without SPS(Sanitary and Phytosanitary Measures)agreement,any differences could create non-tariff barriers.To ensure that no feed materials are forgotten,the working group also monitors any developments on the EU feed material catalogue and register,and specific incidents highlighted via the RASFF(Rapid Alert System for Food and Feed)system.As a group we build on the experience and insight of our members to identify potential issues.Sometimes a simple and or or in the legal text can make all the difference.OBJECTIVES Maximise opportunities for FEDIAF members to market their products:Ensure that valuable feed materials can be used by the pet food industry.Establish the right sourcing and processing standards to protect animal and public health.Facilitate intra and inter community trade(non-tariff barriers;customs codes).ACHIEVEMENTSBrexit:The practical implications&keeping stakeholders talking As FEDIAF together with The Pet food Association of Ireland(PFI),FACCO and UK Pet Food we were able to keep the conversation going.We highlighted the plight of the industry when shipping from A to B and emphasized the need for a common sense solution based on the same text of Animal by-products regulation that is valid in the EU and in the UK(under retained law).The working group will continue to be a platform for sharing technical insights between members and UK Pet Food to ensure that no further details become a stumbling block for members wishing to trade with the UK(or more precisely Great Britain).As a working group,we continue to closely monitor all developments with regards to import conditions under the Border Target Operating Model that has been issued by the UK government.We will also continue to focus on monitoring any potential regulatory divergence going forward.Only by working together in close cooperation with UK Pet Food,and other interested stakeholders,will we be successful in shifting stumbling blocks due to uncertain rules and their interpretation.Going forward,the focus will be on the additional labelling rules introduced by the Windsor framework.Together with UK Pet Food,we hope to work on a fit for purpose time frame to implement the rules that are unlocking trade between GB and Northern Ireland.Cooperating with legislators The working group was the key platform to facilitate communication between the member state competent authorities and 3rd country authorities to enable continuous trade.This includes regular presentation at the EU Market access working group,to ensure that pet food stays at the forefront of the regulators minds when it comes to opening new markets for animal derived products.The group has worked on:Key EU export markets:Monitoring developments and highlighting opportunities for improving cross border trade.Explaining to the EU commissions stakeholders that their continuous support matters a lot to the industry.EU Animal By-Products Regulation&TSE Regulation:Monitoring developments and ensuring a proportionate regulatory environment.Opportunities further afield The group has also been looking at opportunities on the other side of the globe now that the EU launched negotiations for agreements with Australia,Saudi Arabia and India.These will be one of the key focal points for the years to come.19G.Small Pets Working Group INTRODUCTION FEDIAF members manufacture food for all pets,including small mammals,ornamental birds,ornamental fish and others.For these,specific topics or discussions can arise that are not covered in detail by other existing working groups.In order to cover these topics,FEDIAF has established a Small Pets Working Group.This working group looks at the interests of all companion animals apart from cats and dogs.It represents a wide range of manufacturers across the membership who cater for a large number of different species.OBJECTIVES Represent interests of pets other than cats and dogs with respect to legislative pet food issues.Develop nutritional guidelines for a wide range of new species including goldfish,pet birds,guinea pigs,etc.Produce educational resources for pet care professionals and pet owners.Provide expertise on nutrition for small pets,including exotic species.ACHIEVEMENTSIn 2023 the Small Pets Working Group continued work on nutritional guidelines for rabbits and ornamental fish.These guides will be expanded in 2024 to include guinea pigs and,later,pet birds.A N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry20H.Communications Working GroupINTRODUCTION The Communications Working Group continues to increase the visibility of FEDIAF as the responsible voice of the European pet food industry by promoting the three pillars:nutritional expertise,our sustainable credentials and the benefits of pets in society.It also collaborates to support specific working group activities.We have continued to manage communications across a wide range of platforms and formats:website,events,newsletters,press releases,statements,factsheets,and our presence on LinkedIn and X.OBJECTIVESTo support the Technical WGs to:Promote FEDIAFs scientific and technical expertise Communicate FEDIAFs commitment to the environment and the Industrys sustainable credentialsAnd also:To share the benefits of pet interaction and ownership in addition to supporting pet welfare To prepare the Associations Communication plan ACHIEVEMENTSDeveloping a Manifesto and supporting development of stakeholder outreach plan The Communications Working Group coordinated input from other technical working groups and developed copy for a new Manifesto outlining the Industrys asks of policy makers and stakeholders.We also began to coordinate relevant stakeholder events to enhance presence of the FEDIAF in Brussels circles before and post elections,including the presentation of manifesto and introduction of a new Secretary General.Increasing Collaboration with the Pet AllianceIn September 2023,alongside our fellow founding partner AnimalhealthEurope,we welcomed two new partners FVE(Federation of Veterinarians of Europe)and FECAVA(Federation of European Companion Animal Veterinary Associations)to the Pet Alliance.At the annual event at Townhall Europe,we welcomed over 100 guests including Members of the European Parliament,Commission and Council,animal welfare organisations,assistance animal associations and pet industry stakeholders plus many four-legged friends,to celebrate#PetPower.We also had the privilege of hosting guest speaker,Mitja Sedlbauer,Policy Officer from the European Commissions DG SANTE who provided updates on the ongoing revisions in EU animal welfare legislation.Updating our Pets in Society page We updated the content of our website dedicated to summarizing the scientific research about the benefits of pet interaction.With content updated to reflect new research,the page grew by 100%to include over 100 pieces of research.Social Media and Press ArticlesOver the year,FEDIAFs followers on LinkedIn have increased by over 2000 to over 8500 followers around 30%growth.FEDIAF has contributed features for EspeciesPRO and Nordic PetXpert,Pets International,Feed Additives,European Supermarket Magazine and All Pet Food.The association also circulated press releases on several topics,such as publishing new Facts&Figures report,Annual Congress,joint statements on Category 3 animal fats,positions on PPWR and Green Claims developments and most recently welcoming a new Secretary General and Manifesto launch.Cementing the Animal Welfare Task ForceFrom its establishment at the end of 2022,the AWTF has met regularly to monitor legislative developments with the aim of influencing content affecting our industry and its objectives.The Animal Welfare Task Force finalized aproactive statementon companion animals,which is published on the website,as well as a reactive statement on farm animals.21The taskforce has been meeting some pet ecosystem stakeholders to understand the different perspectives and work with regards to the EU animal welfare revision law and more:Four Paws,Eurogroup for Animals,the IPFD,Animal Health Europe and a representative of the voluntary initiative from the EU platform on animal welfare.Finally,the taskforce has been leveraging the expertise within FEDIAF in nutrition and responded to the EC Consultation on Companion Animal Welfare.Indeed,in December 2023,a first proposal ofregulations aimed at safeguarding the welfare of commercially bred dogs and cats in the EU was published.The proposed regulations encompass stringent standards for breeding,housing,care,and marking,with a particular focus on combatting the illegal trade of pets.A N N U A L R E P O R T 2 0 2 4Trade Association MembersAustria,Belgium,Czech Republic,France,Germany,Hungary,Ireland,Italy,Netherlands,Nordics,Poland,Romania,Spain,Switzerland,United Kingdom representing around 375 pet food companies.Company MembersAfinity Petcare,Hills Pet Nutrition,Mars Petcare,Nestl Purina PetCare,WellPet.Board of DirectorsGeneral AssemblyFEDIAF SecretariatReview CommitteeTechnical Working GroupsOver 200 Trade Associations and Company Experts in seven Working Groups plus additional Task ForcesCommunicationsWorking GroupCollaboration of Trade Associations and Company ExpertsExecutive CommitteeTrade Associations Secretaries Action Group(TASAG)15 Trade Association Members Representing 18 CountriesFEDIAF|The Voice of the European Pet Food Industry22Governance and StructureFEDIAF is the trade body representing the European pet food industry.We work with our members and collaborate with authorities,regulators,and academics to ensure favourable conditions for the supply of safe,nutritious,and palatable products.We work through a committee structure and the Secretariat works closely with the Communications Working Group,Review Committee and Executive Committee reporting to the General Assembly.We also have a Board of Directors who meet monthly.The Executive Committee and the General Assembly are chaired by the FEDIAF President,elected every two years.The President of FEDIAF since June 2022 has been Rosa Carbonell.Our Review Committee led by two co-chairpersons to coordinate the working groups and to give political leadership and guidance looks at:Additives and Undesirable Substances Product Communication Nutrition Analytical Science Feed Materials and Trade Environment and Sustainability Small Pets We are supported by the National Associations(TASAG Trade Associations Secretaries Action Group)and Communications Working Group.FEDIAF STRUCTURE23Committees,Working Groups and Task Force MembersBOARD OF DIRECTORSFEDIAF President:Rosa Carbonell-Nestl Purina PetCare Vice-President:Christophe Carlier FACCO Vice-President:Jrgen Wigger IVH Treasurer:Annet Palamba NVG Victor Romano ANFAACEXECUTIVE COMMITTEEExecutive Committee Chair:Rosa Carbonell-Nestl Purina PetCareVice-Chair:Christophe Carlier FACCOVice-Chair:Jrgen Wigger IVHAnnet Palamba NVGAttila Sofalvi FHFIJean Grunenwald POLKARMAFlorian Wastl Mars PetcareGreg Van Praagh UK Pet FoodHermann Habe HTVIrina Derksen Hills Pet NutritionJana Burajov SVPDZJosep Crusafont Affinity PetcareKatrin Langner TASAG representativeLina Lopez WellPetMindaugas Rupsys Mars Petcare(Co-chairCommunications WG)Simone Mezzanotte ASSALCO Robin Balas Royal Canin(Co-Chair Review Committee)Shane Lyster PFAISharon Schroevers BEPEFATerkel Due NPFATisa Kosem Nestl Purina PetCare(Co-chair Communications WG)Urs Eberhard VHNVictor Romano ANFAACYvan Tomaselli Nestl Purina PetCare(Co-Chair Review Committee)REVIEW COMMITTEE Co-Chair:Robin Balas Royal CaninCo-Chair:Yvan Tomaselli Purina PetCaresa Dufva PPFEurope(Nordics)Astrid Schuijlenburch Royal CaninAttila Gyopar Nestl Purina PetCareCelina Torre Affinity PetcareDonna Snellgrove Mars PetcareEva Ruiz Royal CaninIngrid Van Hoek Royal CaninIrina Derksen Hills Petcare VHNIsabelle Kalmar Versele-LegaIzabella Balanyin PPFEurope(HPFA)Jean-Louis Paillot Nestl Purina PetCareJosep Crusafont Affinity PetcareKaren Elizabeth Linley Mars PetcareLina Lopez WellPetMelinda Magdus Royal Canin(HPFA)Maria Otero Garcia Wellness PetMatthew Elliot Mars PetcareMonika Prenner Nestl Purina PetCare(UK Pet Food)Nicole Rabehl Vitakraft(IVH)Paula Carolina Wartelski Nestl Purina PetCarePierre Jaouen Sopral(FACCO)Stefano Zigiotto Hills Petcare(ASSALCO)Thomas Brenten Saturn PetcareUrsula Huber Mars Petcare(HTV)Victor Romano Affinity(ANFAAC)Willeke Stroucken PPFEurope(NVH)Yvan Tomaselli Nestl Purina PetCareA N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry24Committees,Working Groups and Task Force MembersTRADE ASSOCIATIONS SECRETARIES ACTION GROUP(TASAG)Chair:FEDIAF/IVH Antonella Baggini ASSALCOAttila Voros FESZAurlie Bynens FACCOBarbara Lovas-Br FESZBenita Beekhof NVGDonna Holland UK Pet FoodElien Van Stichel BEPEFAEmmenegger Stefan-VHNHege Rosenhaug NordicsKatrin Langner IVHLucian Lumezeanu ARPACMaciej Przezdziak POLKARMAMagda Hrabcova SVPDZMichael Bellingham UK Pet FoodPablo Hervas ANFAACRobert Kiernan-IBEC Santiago de Andres ANFAACSofie Barse NordicsStine Vhile NordicsStphanie Roux FACCOTerkel Due NordicsTamara Rudavsky HTVCOMMUNICATION WORKING GROUP Co-Chair:Mindaugas Rupsys Mars PetcareCo-Chair:Tisa Kosem Nestl Purina PetCareAntonella Baggini ASSALCOBalzs Plyi Mars PetcareDebby van Son NVGEva Ruiz Royal CaninIsabel Buil Affinity PetcareLaureline Malineau Royal CaninNicole Paley UK Pet FoodANIMAL WELFARE TASK FORCE Co-Chair:Laureline Malineau Royal CaninCo-Chair:Tisa Kosem Nestl Purina Andrea Bauer Royal CaninBarbara Thiel BewitalChristophe Carlier Royal CaninFrank von der Brggen PetCom TierernahrungGerd Grossheider GimbornJean-Francois Savard-Nestl PurinaLuisa Vierbaum Rondo FoodMindaugas Rupsys Mars PetcareOriol Baulenas AffinityADDITIVE AND UNDESIRABLE SUBSTANCES WORKING GROUPChair:Matthew Elliott Mars PetcareVice-Chair:Amelie Serment/Hilke Seyffarth Nestl Purina PetCareAline Hartman Nestl Purina PetCareAudrey Sauthier Nestl Purina PetCareAline Hartman PPF EuropeBoris Terlinden Rondo FoodDonna Holland UK Pet FoodEmanuel Fischbacher Bosch TiernahrungGert Grossheider GimbornIrina Derksen Hills Pet NutritionJerome Naar Royal CaninMartin van Bohemen Hills Pet NutritionMarina Stoeckel Saturn PetcareMartin Kaczcara Hills Pet NutritionMichael Alvermann Deutche-tiernahrungPablo Belmar von Kretschmann Royal CaninPaula Carolina Wartelski Nestl Purina PetCarePierre Jaouen SopralUrsula Huber Mars PetcareVictor Romano Affinity PetcareViviana Fadino Nestl Purina PetCareNUTRITION WORKING GROUP Chair:Lisa Conboy Nestl Purina PetCare Vice-Chair:Ingrid Van Hoek Royal CaninAriane Wehrmaker Saturn PetcareAstrid Schuijlenburch Royal CaninBritta Lammers Mars PetcareCatherineBogaert-TeractCelina Torre Affinity PetcareChristina Germain-Nestl Purina PetCareFrancis Pastoor Dechra25Isabelle Jeusette Affinity PetcareIveta Becvarova Hills Pet NutritionJean-Cristophe Bouthegourd Nestl Purina PetCareKarin Kuhn Bosch TiernahrungLibby Sheridan Nestl Purina PetCareLucia Rettenbeck InterquellMikki Koot Edgard&CooperPetra Hellweg Mars PetcareSanan Talibov De Haan Pet foodSarah Hormozi UK Pet FoodStine Vhile-Felleskjpet Thomas Brenten Saturn PetcareFEED MATERIALS AND TRADE WORKING GROUP Chair:Monika Prenner Nestl Purina PetCareVice-Chair:Ursula Huber Mars PetcareAlfred Schlosser Nestl Purina PetCareAndreas Thoben VitakraftAurlie Bynens FACCOBalzs Plyi Mars PetcareBarbara Rondo Brovetto Nestl Purina PetCareDavid Van Belle WellpetIgnacio Conde Affinity PetcareIrina Derksen Hills Pet NutritionKounawit Heng Nestl Purina PetCareKristel Wolfs WellpetLynn Insall UK Pet FoodMartina Gerndt Mars PetcareMartin van Bohemen Hills Pet NutritionMassimo Pagani United Pet foodMindaugas Rupsys Mars PetcareSabine Mladenovic-Spiss OspeltSarka Hrubcova Hills Pet NutritionShane Lyster PFAISilke Santana Nestl Purina PetCareStphanie Roux FACCOStephane Peeters SpectrumTeresa Fischerova Hills Pet NutritionCATEGORY 3 TASK FORCE Chair:Balzs Plyi Mars PetcareAlfred Schloesser Nestle PurinaAurlie Bynens FACCOIgnacio Conde Affinity PetcareMindaugas Rupsys Mars PetcareMonika Prenner Nestl Purina PetCarePierre Jaouen SopralSilke Santana Nestl Purina PetCareStephan Beckmann Mars PetcareTisa Kosem Nestl Purina PetCareANALYTICAL SCIENCE WORKING GROUP Chair:Ingrid Van Hoek Royal CaninVice-Chair:Jean-Louis Paillot Nestl Purina PetCareColin Costin Mars PetcareCynthia Joly Nestl Purina PetCareElena Hijosa Dibaq PetcarePaul Stoeber Nestl Purina PetCareTobias Gorniak FihuminA N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry26Committees,Working Groups and Task Force MembersPRODUCT COMMUNICATION WORKING GROUPChair:Victor Romano Affinity PetcareVice-Chair:Monika Prenner Nestl Purina PetCareAndreas Thoben VitakraftAurlie Bynens FACCOAurelien Goliard Nestl Purina PetCareBalzs Plyi Mars PetcareFrauke Schibilla VitakraftHenning Beckmann IVHIlaria Pesci Royal CaninInes Munzelfeld Mars PetcareIrina Derksen Hills Pet NutritionKlaus Tesch Saturn PetcareLaetitia Rouill Nestl Purina PetCareLotte van Rooijen Afbinter NationalManou Goeminne Versele-LegaMarco Halff Queens ProductsMaria Luisa Valentini Nestl Purina PetCareMarina Stoeckel Saturn PetcareMartin Kaczcara Hills PetcareMichael Alvermann Deutche TiernahrungMonika Prenner Nestl Purina PetCareMonika Vavrova Hills Pet NutritionPierre Jaouen SopralShane Lyster PFAI(Ibec)Stphane Peeters Spectrum BrandsWilleke Stroucken Ppf EuropeTommaso Mechelli Affinity PetcareVictor Romano Affinity PetcareENVIRONMENTAL SUSTAINABILITY WORKING GROUP Chair:Eva Ruiz Royal CaninVice-Chair:Paula Wartelski Nestl Purina PetCareAles Weiner PPFEuropeAmaya Lopez Sastre PetselectBalzs Plyi Mars PetcareCedric Moulin Nestl Purina PetCareCaroline Ritteser BewitalChristian Schunemann IVHDaniela Peloponese Hills Pet NutritionEva Ruiz Royal CaninFabriceMathieu Royal CaninFranz Kainz OspeltIrina Derksen Hills Pet NutritionIzabella Balanyin PPF EuropeKaren Elizabeth Linley Mars PetcareLaetitia Rouill Nestl Purina PetCareLisa Conboy Nestl Purina PetCareLuiz Dias Affinity PetcareMaria Otero Garcia Wellness PetMireia Garcia Affinity PetcareNicole Paley UK Pet FoodPaul van der Raad ProtixPierre Martinez VirbacStphanie Roux FACCO27The FEDIAF Secretariat TeamSONIA FRANCKSECRETARY GENERAL,FEDIAF(2024 PRESENT)Sonia Franck is an accomplished professional with over 30 years of extensive experience across various sectors and now the pet food industry.With a solid educational background,Sonia holds an Executive MBA in Innovation,a Masters 2 degree in Business Administration,a Bachelors degree in Science,as well as a Health Economics and Policy Certificate from the London School of Economics.Prior to her current position as Secretary General at FEDIAF,Sonia was instrumental in driving significant transformation as the Secretary General of IML Innovative Medicines Luxembourg.Sonias career has seen her actively engaged at the EU level within the Pharmaceutical sector,where her insights and contributions have shaped industry practices and policies.ALICE TEMPEL COSTADEPUTY SECRETARY GENERAL&TECHNICAL DIRECTOR,FEDIAF(2020 PRESENT)Alice Tempel Costa,holds a BSc in Agriculture from UFRGS,Brazil and a masters degree in Cooperation&Development from IUSS University in Pavia,Italy.She has over ten years experience in European Trade Associations in Brussels.Before joining FEDIAF in September 2020,she worked for DG AGRI at the European Commission,FAO,Embrapa(The Brazilian Agricultural Research Corporation)and Wageningen University.ALEKSANDRA PRANDOTAEU POLICY AND REGULATORY AFFAIRS MANAGER(2023 PRESENT)Aleksandra has a PhD in Agricultural Sciences specialising in nutrition and food technology from Warsaw University of Life Sciences where she also obtained a Masters Engineer degree in Commodity Studies.Additionally,she graduated from Wageningen University with a MSc in Food Safety and a Bachelor degree in International Relations from the Warsaw School of Economics.Aleksandra has over 15 years of experience working for both public and private sectors.A N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry2829FEDIAF MembershipFEDIAF has 15 members associations and five company members(Affinity Petcare,Hills Pet Nutrition,Mars Petcare,Nestl Purina PetCare and Wellpet),representing 18 countries.AUSTRIAhtvsterreichische HeimtierfuttermittelVereinigung c/o Fachverband der Nahrungs-und GenussmittelindustrieZaunergasse 1 31030 WienAustriaT: 43 1 7122121 0E:infooehtv.atwww.oehtv.atBELGIUMBEPEFABelgian Pet food Association Rue de lHpital,291000 BruxellesBelgiumE:infobepefa.euwww.bepefa.euCZECH REPUBLICSVPDZSdruzeni vyrobcu potravy pro domaci zvirata Prazska 320257 21 Porici nad SazavouCzech RepublicE:svpdzsvpdz.czwww.svpdz.czDENMARKFinland/Norway/SwedenNPFANordic Pet Food Association Havnegade 391058 KbenhavnDenmarkT: 45 33 13 92 92E:indsigtmldk.orgwww.npfa.dkFRANCEFACCOChambre syndicale des fabricantsdaliments pour chiens,chats,oiseaux et autres animaux familiers 46,Boulevard de Magenta75010 ParisFranceT: 33 1 48 03 29 11E:faccofacco.frwww.facco.frGERMANYIVHIndustrieverband Heimtierbedarf e.V.Emanuel-Leutze-Strasse 1140547 DuesseldorfGermanyT: 49 211 59 40 74E:infoivh-online.dewww.ivh-online.deA N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry30HUNGARYFHFIFederation of Hungarian Food IndustriesBcsi t 126-1281034 BudapestHungaryT: 36 30 197 53 88E:barbara.lbiroelelmiszeripar.huwww.elelmiszeripar.huIRELAND PFAI Pet food Association of IrelandIbec84-86 Baggot Street LowerDublin 2D02 H720IrelandT: 353 1 605 1500www.fooddrinkireland.ie www.ibec.ieITALYASSALCOAssociazione Nazionale tra le Imprese per lAlimentazione e la Cura degli Animali da Compagnia Largo Chigi,500187 RomeItalyT: 39 06 69 20 08 98E:assalcoassalco.itwww.assalco.itNETHERLANDSNVGNederlandse VoedingsindustrieGezelschapsdieren Reitseplein 1 5037 AA TilburgNetherlandsT: 31 183 64 50 23F: 31 183 62 11 61E:nvgatriumgroep.nlwww.nvg-diervoeding.nlPOLANDPOLKARMAPolish Pet Food Manufacturers Association ul.Woronicza 31/152,02-640 WarszawaPolandT: 48 22 646 88 18E:sekretariatpolkarma.plwww.polkarma.plROMANIAARPACAsociatia Romana a Producatorilor de Hrana pentru Animale de Compagnie Str.Stirbei Voda,26-28Union International Center II9th Floor,sect.1BucharestRomaniaE:officearpac.rowww.arpac.roFEDIAF Membership31SPAINANFAACAsociacin nacional de fabricantes de alimentos para animales de compaa c/San Agustn,15-1 derecha28014 MADRIDSpainT: 34 91 369 21 34F: 34 91 369 39 67E:SWITZERLANDVHNVerband fr Heimtiernahrung VHNSwiss Pet Food Association Thunstrasse,82Postfach 1009CH-3000 Bern 6SwitzerlandT: 41 31 356 21 21E:infovhn.chwww.vhn.chUNITED KINGDOMUK Pet Food(The Pet Food Manufacturers Association)Aviation House,125 KingswayLondon WC2B 6NHUnited KingdomT: 44 207 379 9009F: 44 207 836 7409E:infoukpetfood.orgwww.ukpetfood.orgAffinity PetcarePlaa dEuropa,54-56,08902 LHospitalet de LlobregatSpainwww.affinity- Pet NutritionGrabetsmattweg4106 TherwilSMars Pet CareEitzer Str.21527283 VerdenGNestl Purina PetCareNestl Purina PetCare EuropeAv.Nestl 551800 VeveySwitzerlandwww.purina.euWellPetWellPet Belgium BVBALeonardo da Vincilaan 19MC Square1831 Machelen,DiegemBFEDIAF|The Voice of the European Pet Food Industry32European Pet Food Data:An Updated and Robust ApproachFEDIAFs Facts&Figures are highly regarded throughout Europe and are frequently referenced and quoted by authorities,stakeholders and the media.We were particularly delighted when the Commission quoted our pet population during discussions on proposed companion animal welfare legislation.With this recognition comes a responsibility to ensure our approach is robust and thorough.This year,we have undertaken a comprehensive update,collaborating with an external data expert at Soulor Consulting to meticulously review both the pet population and market data.This year,as per tradition,we have liaised with all 15 of our National Association members who have supplied us with their local population figures and market data where available.Soulor Consulting has then undertaken a rigorous overview,aligning data and implementing additional layers of verification against previous records,inflation figures and other relevant metrics.Its important to note that we have revised the timeframe for data collection,now gathering information from two years prior to publication.Therefore,in 2024,we will be publishing 2022 data.Due to this shift and the methodology update,we advise against comparing year-on-year data.However,this adjustment ensures consistency moving forward,allowing for reliable comparisons in the future.For further insights into our methodology,detailed notes are available in our Appendix,providing transparency and clarity regarding our data collection and analysis processes.A N N U A L R E P O R T 2 0 2 433Facts&FiguresEuropean Overview 2022CATS129mDOGS106mORNAMENTAL BIRDS52mSMALL MAMMALS30mAQUARIA23mTERRARIA12mTOP PETS IN EUROPETOTAL POPULATION EXCLUDING AQUARIA:329M2552mPETSIN EUROP E50%of households own a petof households own at least one dog166mhouseholds in Europe have a petof households own at least one catANNUAL SALES OF PET FOOD PRODUCTS(bn)NUMBER OF PET FOOD COMPANIESANNUAL VOLUME OF PET FOOD PRODUCTS(MillionsTonnes)ESTIMATED NUMBER OF PLANTSANNUAL GROWTH IN VOLUME(Max)DIRECT EMPLOYMENTANNUAL GROWTH OF INDUSTRYINDIRECT EMPLOYMENTRELATED SERVICES AND PRODUCTS(AccessoriesandServices)bnGROWTH IN SERVICES AND PRODUCTS29.23759.94802(3,0009%2,300,00024.69ta sourced via FEDIAFs National Association members and aligned by Soulor Consulting.For more information on our methodology,please read the Appendix.FEDIAF|The Voice of the European Pet Food Industry34A N N U A L R E P O R T 2 0 2 4AUSTRIABELGIUM BULGARIACROATIACZECHIADENMARKESTONIAFINLANDFRANCEGERMANYGREECEHUNGARYIRELANDITALYLATVIALITHUANIANETHERLANDSNORWAYPOLANDPORTUGALROMANIARUSSIAN FEDERATIONSLOVAKIASLOVENIASPAINSWEDENSWITZERLANDTRKIYEUKRAINEUNITED KINGDOM837,0002,029,000752,000735,5002,208,000643,000243,500797,0007,600,00010,600,000655,0002,800,000520,0008,755,000268,000580,0001,830,000500,0008,109,0002,840,0004,244,00017,643,000911,000299,0009,313,0001,051,000544,0001,409,0004,948,00012,700,000106,364,00068,620,000TOTAL EUROPETOTAL EUFacts&Figures:European Dog PopulationData sourced via FEDIAFs National Association members and aligned by Soulor Consulting.For more information on our methodology,please read the Appendix.35AUSTRIABELGIUM BULGARIACROATIACZECHIADENMARKESTONIAFINLANDFRANCEGERMANYGREECEHUNGARYIRELANDITALYLATVIALITHUANIANETHERLANDSNORWAYPOLANDPORTUGALROMANIARUSSIAN FEDERATIONSLOVAKIASLOVENIASPAINSWEDENSWITZERLANDTRKIYEUKRAINEUNITED KINGDOM1,985,0002,536,000817,000434,0001,364,000698,000300,4001,002,00014,900,00015,200,000606,0002,380,000373,00010,228,000407,000638,0003,010,000720,0007,250,0001,957,0004,424,00023,262,000541,000461,0005,860,0001,715,0001,853,0004,737,0007,575,00011,900,000129,113,40079,086,400Data sourced via FEDIAFs National Association members and aligned by Soulor Consulting.For more information on our methodology,please read the Appendix.TOTAL EUROPETOTAL EUFacts&Figures:European Cat PopulationFEDIAF|The Voice of the European Pet Food IndustryA N N U A L R E P O R T 2 0 2 436AUSTRIABELGIUM BULGARIACROATIACZECHIADENMARKESTONIAFINLANDFRANCEGERMANYGREECEHUNGARYIRELANDITALYLATVIALITHUANIANETHERLANDSNORWAYPOLANDPORTUGALROMANIARUSSIAN FEDERATIONSLOVAKIASLOVENIASPAINSWEDENSWITZERLANDTRKIYEUKRAINEUNITED KINGDOM141,000331,00045,00025,70068,000211,00010,00057,0005,800,0003,700,000971,000415,00097,00012,882,00012,00021,0001,800,000195,0001,128,000699,000296,0003,296,00031,00040,5005,002,000311,000300,00011,477,000778,0001,600,00051,740,20034,094,200TOTAL EUROPETOTAL EUFacts&Figures:European Ornamental Bird PopulationData sourced via FEDIAFs National Association members and aligned by Soulor Consulting.For more information on our methodology,please read the Appendix.37AUSTRIABELGIUM BULGARIACROATIACZECHIADENMARKESTONIAFINLANDFRANCEGERMANYGREECEHUNGARYIRELANDITALYLATVIALITHUANIANETHERLANDSNORWAYPOLANDPORTUGALROMANIARUSSIAN FEDERATIONSLOVAKIASLOVENIASPAINSWEDENSWITZERLANDTRKIYEUKRAINEUNITED KINGDOM333,000320,00070,20041,000117,000292,00011,50041,0001,252,0002,300,00090,00086,00028,0001,500,00014,00024,000625,000160,000380,00090,000152,0003,768,00045,00035,500692,000262,000413,000864,000447,0008,200,00022,653,2008,801,200TOTAL EUROPETOTAL EUFacts&Figures:Number of European AquariaData sourced via FEDIAFs National Association members and aligned by Soulor Consulting.For more information on our methodology,please read the Appendix.A N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry38AUSTRIABELGIUM BULGARIACROATIACZECHIADENMARKESTONIAFINLANDFRANCEGERMANYGREECEHUNGARYIRELANDITALYLATVIALITHUANIANETHERLANDSNORWAYPOLANDPORTUGALROMANIARUSSIAN FEDERATIONSLOVAKIASLOVENIASPAINSWEDENSWITZERLANDTRKIYEUKRAINEUNITED KINGDOM508,0001,026,00060,10037,000187,000389,00027,000160,0002,870,0004,900,000416,000398,000170,0001,816,00033,00056,000775,000200,0001,252,000238,00094,0006,633,00045,00086,0001,524,000498,000493,000821,000893,0003,300,00029,905,10017,565,100TOTAL EUROPETOTAL EUFacts&Figures:European Small Mammal PopulationData sourced via FEDIAFs National Association members and aligned by Soulor Consulting.For more information on our methodology,please read the Appendix.39AUSTRIABELGIUM BULGARIACROATIACZECHIADENMARKESTONIAFINLANDFRANCEGERMANYGREECEHUNGARYIRELANDITALYLATVIALITHUANIANETHERLANDSNORWAYPOLANDPORTUGALROMANIARUSSIAN FEDERATIONSLOVAKIASLOVENIASPAINSWEDENSWITZERLANDTRKIYEUKRAINEUNITED KINGDOM129,000160,00014,0003,2005,300115,000n/a29,5002,100,0001,300,0006,00060,00021,0001,366,000n/a1,500153,000110,000217,00043,00032,0001,081,0003,8003,6001,465,00060,000413,000160,000897,0002,100,00012,048,9007,287,900TOTAL EUROPETOTAL EUFacts&Figures:European TerrariaData sourced via FEDIAFs National Association members and aligned by Soulor Consulting.For more information on our methodology,please read the Appendix.FEDIAF|The Voice of the European Pet Food IndustryA N N U A L R E P O R T 2 0 2 440AUSTRIABELGIUM BULGARIACROATIACZECHIADENMARKESTONIAFINLANDFRANCEGERMANYGREECEHUNGARYIRELANDITALYLATVIALITHUANIANETHERLANDSNORWAYPOLANDPORTUGALROMANIARUSSIAN FEDERATIONSLOVAKIASLOVENIASPAINSWEDENSWITZERLANDTRKIYEUKRAINEUNITED KINGDOM3,933,0006,402,0001,758,3001,276,4003,949,3002,348,000592,4002,086,50034,522,00038,000,0002,744,0006,139,0001,209,00036,547,000734,0001,320,5007,822,0001,885,00018,336,6005,867,0009,242,00055,683,0001,576,800925,60023,856,0003,897,0004,016,00019,468,00015,538,00039,800,000351,474,400215,084,400TOTAL EUROPETOTAL EUFacts&Figures:European Population TotalData sourced via FEDIAFs National Association members and aligned by Soulor Consulting.For more information on our methodology,please read the Appendix.41AUSTRIABELGIUM BULGARIACROATIACZECHIADENMARKESTONIAFINLANDFRANCEGERMANYGREECEHUNGARYIRELANDITALYLATVIALITHUANIANETHERLANDSNORWAYPOLANDPORTUGALROMANIARUSSIAN FEDERATIONSLOVAKIASLOVENIASPAINSWEDENSWITZERLANDTRKIYEUKRAINEUNITED KINGDOM3,600,0006,082,0001,688,1001,235,4003,832,3002,056,000580,9002,045,50033,270,00035,700,0002,654,0006,053,0001,181,00035,047,000720,0001,296,5007,475,0001,725,00017,956,6005,777,0009,090,00051,915,0001,531,800890,10023,164,0003,635,0003,603,00018,604,00015,091,00031,600,000329,099,200206,561,200TOTAL EUROPETOTAL EUFacts&Figures:European Population Total Excluding AquariaData sourced via FEDIAFs National Association members and aligned by Soulor Consulting.For more information on our methodology,please read the Appendix.A N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry42AUSTRIABELGIUM BULGARIACROATIACZECHIADENMARKESTONIAFINLANDFRANCEGERMANYGREECEHUNGARYIRELANDITALYLATVIALITHUANIANETHERLANDSNORWAYPOLANDPORTUGALROMANIARUSSIAN FEDERATIONSLOVAKIASLOVENIASPAINSWEDENSWITZERLANDTRKIYEUKRAINEUNITED KINGDOMTOTAL EUROPETOTAL EUFacts&Figures:%of European Households Owning at Least One Dog or One Cat 17 28 30 33 24 25 29 15 42 23 21 19 22 18 24 23 20 31 21 24 14 13 50 34 25 18 28 22 27 37 34 32 18 23 17 30 49 41 39 32 45 48 28 34 29 15 39 32 27 17 15 21 12 31 5 14 19 30 33 27 25 27 27 26Data sourced via FEDIAFs National Association members and aligned by Soulor Consulting.For more information on our methodology,please read the Appendix.43AppendixPET POPULATION DATA METHODOLOGYThis year FEDIAFs member national associations provided data for 2022.The decision to publish figures from two years previously was made in order to harmonize data.Previously,some markets have been unable to provide the most recent year of data in time for publication.For countries where member associations provided 2022 data,this data was checked against 2021 to ensure consistency.In some cases this years data is the same as the data published last year.Where we do not have a member association,or if European countries were unable to supply data,Soulor Consulting made estimates based on data publshed by FEDIAF for 2021 using a new methodology by looking at household growth 2021-2022.Most of our national associations provide FEDIAF with aquaria as they now understand that we collect aquaria not fish.As a result,FEDIAF has not had to translate fish numbers into aquaria.Where markets have not provided any data,Solour has based figures on what was published in 2021 and the number has been aligned according to the average number of pets per household.Please note that this year an additional country has been added:Croatia.The Total Europe&EU total households owning a pet percentages are calculated from those National Associations that submitted a number for households owning a pet(total)which were FR,DE,NL,ES&GB.Those countries account for 40%of the total pet population(Total Europe,64%for EU).Those calculated percentages of households owning for those five countries was applied to the number of total households for Total Europe and EU.All final population data was rounded.Due to the change in methodology,comparisons between the data published in this report,should not be compared to previous years.MARKET DATA METHODOLOGY As with Population data,this year national associations were asked to provide data for 2022.Where a national association was not able to provide volume or value sales for the market,this missing data was calculated based on expected price per kilo.Where a country did not submit,the total for total pet was estimated using a new methdology.As there has been a change in methodology this year which means that no data was available for previous years,the Total Europe value growth figure is the percentage change in consumer price inflation 2021-2022 from European Commission CPI indices(for the EU27)while volume is quoted as a maximum change based on the change in the pet population between 2021 and 2022.PARTICIPATING MARKETSPopulation&Market Data from NA data:AT,BE,CZ,FR,DE,HU,IT,NL,NO,PL,SK,ES,CH,UK(some data points were changed by Soulor Consulting during checking process).Population&Market Data from FEDIAF/Soulor Consulting Estimates:BG,HR,DK,EE,FI,GR,IE,LV,LT,PT,RO,RU,SI,SE,TR,UA.2022 Total Population and Total Europe Market Data include all of the listed 30 countries(TotalEU=24 countries,CY,LU&MT excluded due to small size;IS,LI excluded from EEA due to small size).A N N U A L R E P O R T 2 0 2 4FEDIAF|The Voice of the European Pet Food Industry44AGM Annual General MeetingAMFEP Associations of Manufacturers and Formulators of Enzyme ProductsAPAG The European Oleochemical IndustryAWTF FEDIAF Animal Welfare Task ForceBHA Butylated Hydroxy AnisoleCEFIC The European Chemical Industry CouncilDG AGRI European Commission Directorate-General for Agriculture and Rural DevelopmentDG ENVI European Commission Directorate-General for the EnvironmentDG GROW European Commission Directorate-General for Internal Market,Industry,Entrepreneurship and SMEsDG IMCO Committee on the Internal Market and Consumer ProtectionDG SANTE European Commission Directorate-General for Health and Food Safety DG TRADE European Commission Directorate-General for TradeEC European CommissionEF Environmental FootprintEFSA European Food Safety Authority ESVCN European Society of Veterinary&Comparative Nutrition ESWG Environmental Sustainability Working GroupEU European UnionFECAVA Federation of European Companion Animal Veterinary AssociationsFEDIAF European Pet Food Industry FederationFEFAC The European Feed Manufacturers FederationFEFANA European Union trade association of the animal feed additives industryFSFS Framework for Sustainable Food SystemsFVE Federation of Veterinarians in EuropeGAPFA Global Alliance of Pet Food AssociationsGHG Greenhouse Gas EmissionsIIA Inception Impact AssessmentJRC Joint Research CouncilLCA Life Cycle AnalysisNGOs Non-Governmental OrganisationsNWG Nutrition Working GroupPARNUTs Food intended for Particular Nutritional PurposesPEF Product Environmental FootprintPEFCRs Product Environmental Footprint Category RulesPPWR Packaging and Packaging Waste RegulationRASFF Rapid Alert System for Food and FeedRED The EU Renewable Energy DirectiveRES Renewable Energy SourcesSAB Scientific Advisory BoardSCoPAFF Standing Committee on Plants,Animals,Food and FeedSPS Sanitary and Phytosanitary MeasuresTASAG FEDIAF Trade Associations Secretaries Action Group TSE Transmissible spongiform encephalopathies UK United KingdomWG Working GroupGlossary45FEDIAF Annual Congress 2024SponsorsFeedKindPet is a novel protein produced from fermentation of Non-GMO bacteria.As alternative protein from bacteria,FeedKindPet is the first product to be produced at full scale and brand new,unique fermentation facility operated by Calysta(in a joint venture with Adisseo).FeedKindPet is fully approved for application in pet food within the EU(and many other countries)and since 2nd Quarter this year available within the EU.First introductions of new pet food products,containing FeedKindPet,were done at Interzoo in Nrnberg this year.This year,we would like to thank and introduce our two Gold Sponsors:We 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PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES1Pushing the boundaries of EPR policy for textilesPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES2About this report 3Executive summary 6In support of this report 8Todays textiles system is wasteful 11Fixing a leaky system 14Extended Producer Responsibility:a necessary part of the solution 24EPR policy design:a common direction of travel 30Maximising the opportunity:designing EPR for a circular economy 39Accelerating progress 44Technical Appendix 46Acknowledgements 67ContentsPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES3This report,written for policymakers,aims to contribute to the global debate on textile waste and pollution by focusing on Extended Producer Responsibility(EPR)policies a necessary part of the solution to achieve a circular economy for textiles.EPR is a crucial policy tool to ensure discarded textiles are collected and put back in circulation at scale.To date,three countries have adopted EPR policy covering textiles(France,Hungary,and the Netherlands).EPR policy for textiles is currently debated and/or proposed in a range of other countries and regions(including Australia,Ghana,Kenya,Colombia,California,New York,and all EU Member-States).This report aims to contribute to this emerging policy conversation,outlining a shared direction of travel and the opportunity for EPR to create ambitious outcomes that accelerate the circular economy transition.The data modelling and analytics included in this report focus on selected countries(including Chile,European Union Member States,Ghana,India,Kenya,Tunisia,and the USA),chosen due to the significant role they play in the trade of used textiles,as well as the existence or ongoing development of EPR policy for textiles in these countries.The authors recognise that certain significant topics of relevance to the global textiles debate are not covered in depth in this report.For example,the labour market of todays global reuse and recycling economy,and potential job impacts of a circular economy transition,are not well understood today and require further exploration.To quote this report,please use the following reference:Ellen MacArthur Foundation,Pushing the boundaries of EPR policy for textiles(2024).About this reportPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES4Box 1 What is covered by the term“textiles”In this report,“textiles”refers to textile products that are generally in scope of existing(or likely to come under future)EPR obligations:clothing,footwear,and household textiles such as bed linen.Products such as mattresses,technical textiles,and furniture with upholstery fall outside of the scope of this report,as these are usually not covered under EPR for textiles policies,but instead are covered under separate EPR schemes(e.g.furniture).In addition,clothing,footwear,and household textiles all enter the same collection systems when they are discarded,which are different from collection systems in place for furniture and mattresses.The focus of this report is on discarded textiles,i.e.textiles that are discarded by citizens and enter a form of waste management(waste collection or uncontrolled disposal).These textiles may or may not have reached the end of their useful life at the point of disposal.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES5Box 2 What we mean by Extended Producer Responsibility(EPR)In this report,EPR refers to mandatory,fee-based Extended Producer Responsibility schemes.The OECD defines EPR as an environmental policy approach in which a producers responsibility for a product is extended to the post-consumer stage of the products life cycle.1 Under EPR legislation,businesses that place products on the market(“obligated producers”)become responsible for managing their products when these are discarded by consumers.In the context of textiles,obligated producers are typically brands,retailers,and online marketplaces that place clothing,footwear,and household textiles on the market.2 The responsibility imposed on these producers may be financial,organisational,or both.3EPR is a performance-based regulation in which specific outcomes and objectives are set and defined by law,and so are the roles and responsibilities of stakeholders involved in delivering on these(such as obligated producers,local governments,charities,and non-profit operators).Generally,companies can fulfil their responsibility individually,by putting in place their own collection,sorting,reuse,and recycling systems,or collectively,by joining efforts to establish a shared system.Producer Responsibility Organisations(PROs)In a collective EPR scheme,obligated businesses delegate their responsibility(fully or partially)to a third party.Typically but not exclusively the third party is a joint PRO,which fulfils obligations for the in-scope products on the businesses behalf,and coordinates the activities identified as within the scope of such a body.The legally obligated businesses pay the PRO,in order to cover the necessary expenses for achieving the legally required outcomes and objectives.FeesThe PRO is normally funded through fees that each obligated producer pays to the PRO.Such an EPR scheme can be referred to as a fee-based EPR scheme.The scope,design,and operating methods can vary across countries.In fee-based EPR schemes,the funding remains ring-fenced and dedicated to the after-use management of the product and related activities(such as data-gathering and support to R&D).These activities should be clearly defined in the scope of the EPR legislation and in the responsibilities of the PRO body.Jurisdictional contextIn most countries,national governments adopt,implement,and enforce EPR policy.In federal countries however(such as the USA and Belgium),sub-national governments form the legal authority enacting EPR regulations.For this reason,this report refers to the“jurisdictional context”or“jurisdictional borders”,to indicate the geographical remit where EPR is implemented and enforced.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES6Around the world,the vast majority of textiles leak out of the system when they are discarded:they are incinerated,landfilled,or leak into the environment.Textile waste is a direct consequence of our linear economic system.Currently,products are not typically designed to last and are hard to recycle.Most business models are linear,with high levels of throughput,low rates of utilisation,and low levels of recycling.To fix this leaky system,separate collection infrastructure for textiles needs to be scaled up dramatically and,importantly,implemented in locations where it currently does not exist.Where separate collection systems exist today,they are underdeveloped and do not capture all textiles placed on the market.Because of their potential market value,textiles deemed rewearable,and therefore suitable for reuse,are prioritised for collection in todays system.After collection and sorting,reusable textiles are traded around the world.While such reuse exports lead to increased value capture and utilisation of clothing,they also cause a disproportionate waste management burden on importing countries,which often lack the infrastructure to manage clothing when it is no longer reusable.A comprehensive circular economy approach is the only solution that can match the scale of the global textile waste problem.In a circular economy,textile products are used more,made to be made again,and made from safe and recycled or renewable inputs.In this system,businesses contribute to supporting infrastructure commensurately with what they place on the market,to ensure their products are collected and reused,repaired,remade,or recycled into new textile products.Today,the economics for separate collection and recirculation of textiles do not stack up this is a key barrier to achieving a circular economy for textiles.To establish separate collection systems at scale,structural funding is needed to cover the net cost associated with managing all discarded textiles,not just the fraction with high market value.Where separate collection systems are in place,they are largely funded through the reusable clothing fraction.This market-driven system faces significant pressure,and will not achieve further expansion nor material capture unless dedicated funding is put in place to cover the cost.This publication lays out why mandatory,fee-based Extended Producer Responsibility(EPR)policy is a necessary part of the solution to build a circular economy for textiles.EPR policy places responsibility on producers with regard to the collection,sorting,and recirculation of the products they place on the market,resulting in funding that is dedicated,ongoing,and sufficient to manage textile products when they are discarded.Without EPR policy,the collection,reuse,and recycling of textiles is unlikely to be meaningfully scaled and tens of millions of tonnes of textiles will continue to be landfilled,incinerated,or will leak into the environment every year.In a world of finite resources,EPR policy helps create new sectors and employment dedicated to reverse cycle activities,such as collection,sorting,reuse,repair,and recycling.As such,it can help shift the economic balance away from the production of new products and materials.Executive summaryPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES7This report proposes a common approach to EPR policy design for textiles,based on circular economy principles.To achieve a global circular economy for textiles,national EPR systems need to align around the same key objectives,while setting targets that reflect a specific understanding of the national and local context,stakeholder landscape,and infrastructure availability.In addition,alignment around common definitions and stakeholder involvement is crucial to the effectiveness of EPR policy.In its current form,the implementation of EPR policy is incomplete and leaves opportunities untapped.Today,producer responsibility stops at the point of export,diminishing EPRs potential to collect and manage discarded textiles in countries where they ultimately end up.As reusable clothing is traded around the world,a potential transboundary extension of EPR needs to be explored to achieve a global circular economy for textiles.Importantly,EPR has the potential to break away from its traditional downstream focus and deliver circular economy outcomes,but this potential is currently underexploited.This report outlines how EPR can stimulate circular design,extend the use phase of textile products,and address pollution impacts that occur throughout the use phase.As the regulatory process for EPR development takes years to come to fruition,businesses should not wait to accelerate progress and turn circular economy ambitions into demonstrable action.Coordinated and compounding industry action is needed to challenge the linear economic model at its core,and to capture the full value opportunity by keeping products and materials in use for as long as possible.Voluntary business actions,including the establishment of voluntary EPR schemes,are key to accelerate progress,creating market demand for circular economy solutions,in anticipation of mandatory policies.This report is intended as a starting point,not to provide all the answers.We recognise that EPR is most effective as part of a wider circular economy policy framework,addressing product design and business models.EPR is a first and necessary step,but more needs to be done to transform the textile system.We also recognise there are other important considerations and challenges that need to be further understood which are not part of the scope of this report,including the socio-economic impacts of implementing EPR policy for textiles,the environmental impacts of textile waste leakage,and the technological innovations required to reuse and recycle at scale.For this we encourage further research.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES8Ghana has a thriving reuse economy,in which Ghanaians regularly purchase used clothing and use the services of local repair businesses.However,our reuse economy also generates waste,as items eventually become non-reusable and are discarded.We are developing an EPR policy for plastics,which will be expanded to textiles and other material streams over time.The common approach proposed in this report is certainly in the right direction,and I expect that all countries will pursue a minimum level of alignment with the approach.To eliminate textile waste,countries at both the import and export ends of the used textiles trade must collaborate more closely.Oliver Boachie Special Advisor to Ghanas Minister of Environment,Science,Technology,and InnovationTextile waste is a significant contributor to the climate crisis.But right now,we dont have sufficient infrastructure to responsibly manage discarded clothing and increasing amounts of textile waste,and our existing systems do not support consistent,convenient,or widespread collection needed to incentivise the reuse and recycling of textiles.Thats why we need comprehensive policy to make the economics work for textile reuse,repair,and recycling.Particularly,EPR offers an opportunity to do just that while holding the textile industry responsible for its role in the system.Congresswoman Chellie Pingree U.S.CongressFrance has an important legacy of EPR policy for textiles,as our textiles EPR scheme has been in place since 2008.In recent years,we have been working to evolve our EPR system beyond collection and sorting operations,towards stimulating circular business models with a particular focus on repair and recycling.This way,EPR helps ensure products are used longer before being discarded.Moving forward,EPR should continue to evolve and should address the fate of used textiles after exportation.For example,EPR presents a significant opportunity to enhance transparency and traceability on the used textiles trade.By doing so,it can help ensure that in the future,we only export products to markets where demand and capacity exists to reuse textiles and manage them after use.Lonard Brudieu Deputy Head for Circular Economy,French Ministry for Ecological Transition,DGPRIn Chile,our ambition is to expand our EPR legislation to include textiles a process wed like to kickstart in 2025.The minimum objectives set out in this report are a relevant starting point.In Chile,EPR for textiles will not only improve separate collection and sorting but will also support increased local reuse,by including tailors and small upcycling businesses as EPR fund recipients.Additionally,EPR can deliver positive social impacts by training,involving,and integrating informal workers,building on our experience with the packaging EPR system.But we cannot recycle our way out of Chiles high per-capita textile consumption.While EPR may not be the only solution,it is an important part of the broader effort to shift towards a circular economy.Toms Saieg Chief,Circular Economy Office,Chilean Ministry of EnvironmentIn 2023,EPR policy for textiles entered into force in The Netherlands.Throughout the development of this policy,and from the many stakeholders we consulted,we learnt that while EPR is essential,EPR alone is not sufficient to achieve a circular economy.Other policy measures such as ecodesign are needed.Still,EPR is an important part of the toolbox of policies that can help reduce the volumes of textile waste generated.There is room to further develop EPR policy in line with principles of the circular economy,by giving more attention to circular design,reuse,and repair.Marije Slump Senior Policy Advisor on Circular and Sustainable textiles,Dutch Ministry of Infrastructure and Water ManagementTextile and plastic waste and fragments represent one of the biggest environmental problems related to pollution and biodiversity loss in the world.A large volume of plastics is hidden in other products,such as textiles and packaging.That is why it is important to expand debates on these products and their appropriate disposal to reduce pollution.Adalberto Maluf Brazils National Secretary for Urban Environment and Environmental Quality of Ministry of Environment and Climate ChangeIn support of this reportPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES9A growing number of governments are considering adopting policy to require EPR schemes for textile products to better address related environmental impacts.This report by the Ellen MacArthur Foundation reviews the limited existing experience with EPR for textiles and will help to inform future policy development on this important issue.Peter Brkey Circular Economy Lead,OECD Environment DirectorateUnsustainable consumption and production patterns drive the climate,nature,and pollution crises and hinder opportunities for resilient,inclusive,and just socio-economic development.The textile sector is complex.Its impacts on the environment,on people,and economies call for a transformative change that requires an unprecedented level of policy coherence and collaboration across countries and between stakeholders,accompanied by the leadership and commitment of responsible industries.This EMF report contributes to expanding existing knowledge.UNEP is working to accelerate the transition towards a sustainable and circular textile value chain by scaling circular business models and product design,addressing overproduction and overconsumption,and eliminating hazardous chemicals,including via EPR as well as through strategic partnerships such as with EMF.Sheila Aggarwal-Khan Director,Industry and Economy Division,United Nations Environment ProgrammeTackling textile waste generation requires collaboration on a global scale.At the Global Action Partnership for Extended Producer Responsibility,our mission is to advance EPR implementation around the world,including for textiles.We believe this report by the Ellen MacArthur Foundation is an important step to advance the debate on EPR policy design and the need for cross-border alignment and collaboration.Nicole Bendsen Global Action Partnership for EPREPR policies are essential to reducing textile waste and pollution.At UNECE we have been working closely with governments and key actors across the textile and fashion sectors to promote the principles of accountability,circular economy,and traceability through our Sustainability Pledge initiative.This report supports the ongoing efforts towards a circular economy.I encourage all actors in the textiles system to consider its conclusions.Maria Teresa Pisani Chief ad interim Trade Facilitation Section,United Nations Economic Commission for EuropeThe report on EPR for textiles by the Ellen MacArthur Foundation comes at a critical time as countries in the EU and in other regions of the world are planning to or starting to put in place EPR schemes.Such schemes are critical in the aim to move away from fast fashion and to reduce textile waste.To be successful,EPR schemes have to be designed carefully to make sure they are not only a means to ensure that the producers pay for the waste handling,but also act as an instrument to ensure sufficiency,higher quality textiles,and less textile waste.Lars Fogh Mortensen and Sanna Due European Environment AgencyAt Decathlon,we believe that well-designed EPR schemes are vital to incentivise sustainable design and to develop a strong and innovative textile waste industry.To achieve this,collaboration is critical.We must work together to build a global system that is capable of closing the loop through collection,reusing,sorting,and recycling.“Pushing the boundaries of EPR policy for textiles”lays out the necessary steps to help us get there.Anna Turrell Chief Sustainability Officer,Decathlon An EPR-focused report on textiles is essential for the textile sector to drive better growth.Textiles significantly impact the environment,and adopting circular business models like repair,rental,resale,and remaking can decouple revenue from production.This approach enhances efficiency,meets regulatory demands,and provides a competitive advantage.Transforming the textile value chain into a circular model addresses environmental and social impacts,while supporting people,prosperity,and equity.In Colombia,we are currently piloting EPR for textiles on a voluntary basis and we look forward to the next steps on this journey.Ruben Goldsztayn Director of Sustainable Production and Consumption,National Business Association of Colombia(ANDI)This report is a testament to the expertise and dedication of the Ellen MacArthur Foundation in its objective to accelerate towards a circular economy for textiles.The research and comprehensive data analysis will be extremely valuable for the Australian clothing industry and for Seamless,Australias national product stewardship scheme,as we deliver on our purpose and navigate our way towards achieving clothing circularity by 2030.Ainsley Simpson Chief Executive Officer,Seamless Australia For over 30 years,EXPRA and its 34 members have successfully implemented EPR for packaging,proving it is a necessary part of the solution towards a circular economy,when underpinned by proper legal frameworks and enforcement.This insightful EMF report adapts EPR experiences from packaging and other sectors to textiles,guiding governments and the entire textile value chain.EPR can greatly contribute to transforming textiles into durable products with abundant second-life options,keeping resources in the economic cycle for as long as possible.Joachim Quoden Managing Director,EXPRAPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES10Textile waste is a critical global issue,largely stemming from our current linear economic system where products are neither designed for longevity nor for recycling.To address this,we must dramatically scale up separate collection infrastructure,especially in areas where such infrastructure does not exist.EPR policies are crucial,mandating producers to fund the collection,sorting,reuse,and recycling of textiles.EPR can also stimulate circular design and extend the use phase of textiles,and it can help to align global efforts,across governments and industry,to create a circular economy for textiles.Jan Patrick Schulz Chief Executive Officer,Landbell GroupTextiles are woven into all facets of our lives in clothing,furniture and construction materials and we are not effectively managing how they are processed at end of life,reinforcing wasteful economic practices and deepening environmental degradation.We urgently need to adopt policy tools that take a lifecycle approach for redesigning,reusing,and reincorporating textiles in our economy in creative and generative ways and EPR offers a valuable starting point for this.Kobie Brand Deputy Secretary General,ICLEI and Regional Director,ICLEI AfricaThis report highlights why EPR policy is a necessary part of the transition to a circular economy for textiles.Mandatory,fee-based EPR policy is necessary to ensure producers are held responsible for the collection,sorting,recirculation,and eventual end-of-life of the products they place on the market.Moving beyond its traditional focus on waste management,EPR policy can be designed to build a circular system,in which products are designed for a long use phase.EPR policy can also deliver solutions for textiles exported across borders,by setting aside funding to support importing countries to collect,sort,and recirculate and ultimately process used clothing and other textiles.Hilde van Duijn Managing Director,Circle Economy FoundationThe time for talk is over action is needed now.This report clearly shows that to fix our“leaky”textile waste system,we need better collection infrastructure.But its not just about collecting and recycling.We need to look at EPR more holistically and understand how it can drive better product design.This report does an excellent job of bringing these issues to light.It is time for businesses to step up,work together,and make sustainable textile management a reality.Anjali Krishnan Program Managev,Alternate Materials,IDHPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES11The vast majority of textiles leak out of the system when they are discarded.The vast majority(more than 80%)of textiles leak out of the system when they are discarded:they are incinerated,landfilled,or leak into the environment(see Appendix A).In the EU,88%of discarded textiles end up in mixed household waste and are therefore incinerated or landfilled.4 In the US,it is estimated that 85%of textiles end up in landfill or incineration after having been discarded.5 Population growth and the increase in disposable income in emerging markets are projected to continue to drive the growth in waste generation,if we continue business-as-usual.When textiles are discarded,they are extremely likely to become mismanaged.As separate collection systems are underdeveloped(see“Fixing a leaky system”),the vast majority of these products are not collected separately,with no chance of a productive afterlife.When textiles are disposed of as part of mixed household waste,they are not sorted out and are instead landfilled,incinerated,or abandoned in the environment.The environmental and social costs of mismanaged textiles are significant,and further exacerbate the triple planetary crises of climate change,biodiversity loss,and pollution.Textile waste can end up being burned in open pits,dumped onto beaches and into rivers or seas,or disposed of in unsanitary landfills and dumpsites.These pathways all lead to the release of pollutants,including hazardous chemicals,threatening species and habitats.6 Substances of concern that are contained in textiles,such as dyes or chemicals that have been introduced during production or use,can leak out as textiles degrade into the environment.In particular,the release of microplastics causes significant harm to marine ecosystems.7 When textiles are landfilled or burnt in the open,without controlling emissions,the combustion gases also have the potential to release substances of concern.8 As textiles decompose,natural fibres such as cotton and wool generate the greenhouse gas(GHG)methane,which is released into the environment if the landfill is not properly controlled.Plastic-based fibres will remain in landfills for decades,with the average polyester product likely to survive for over 200 years.9 The most vulnerable populations in lowest income tiers are most exposed to textile-related pollution due to the likelihood that they reside nearer to dumpsites and disposal areas.Even where textiles are recycled,improper processes can expose workers to harmful dust and chemicals.10 Todays textiles system is wastefulWe define mismanagement as“products used textiles that are not recirculated after they have been discarded,either because they are:1)not separately collected,or 2)separately collected but subsequently end up in landfill(controlled or otherwise),incineration(including waste-to-energy),or dumping(including open burning and littering).”PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES12The significant volumes of textile waste are a direct consequence of the current resource-extractive,linear system.The textiles industry extracts resources to make products,such as clothing and household linens,that are often used for a short time and,ultimately,thrown away.It relies mostly on non-renewable resources,including oil to produce synthetic fibres,fertilisers to grow cotton,and chemicals to produce,dye,and finish fibres and textiles.In this system,large resource externalities are not priced in,including GHG emissions,biodiversity loss,and pollution from textile waste.The clothing industry is a particularly problematic sector as it is characterised by underutilisation,high volumes of unsold products,and high destruction rates.It is estimated that 49%of all textile products put on the market in Europe are destroyed before use,after having been returned or unsold.11Three main drivers underpin the generation of textile waste:1 Clothing is generally delivered through linear,single-sale business models,which do not provide for take-back,resale,or repair operations.Circular business models12 represent a key opportunity to decouple economic activity from the use of finite resources and can be explored further in our paper“Rethinking business models for a thriving fashion industry”.The Foundations latest demonstration project,The Fashion ReModel,works with a group of industry frontrunners from across luxury,activewear,retailers,mid-range,and high-street to begin to decouple revenue from production.2 Currently,products are not always designed to last and are hard to recycle.The Jeans Redesign project is an example of how one fashion product can be redesigned to be used more,made to be made again,and made from safe and recycled or renewable inputs.Designing and producing textiles of higher quality is the most powerful way to capture economic value through circular business models and reduce pressure on resources.3 Separate collection infrastructure is underdeveloped and does not capture all textiles.This is the primary focus of this report.We recognise that separate collection infrastructure is only a part of the solution to achieve a circular economy.Profound transformations are required on the level of product design and business models.At the same time,separate collection infrastructure is essential to divert the significant flows of textiles that currently end up being landfilled or incinerated,or leak into the environment,and to create opportunities to keep these products and materials in use.It is now widely recognised that a comprehensive circular economy approach(see Box 3)is the only solution that can match the scale of our global waste and pollution problem.The circular economy is more than a way to treat the symptoms of the current take-make-waste economy.It is a bigger idea that tackles the root causes of many global challenges such as waste and pollution,climate change,and biodiversity loss at the same time as providing new economic opportunities.Box 3A circular economy for textiles13Used moreMade from safe and recycled or renewable inputsMade to be made againBusiness models that keep products at their highest value,like rental and resale,are the norm across the industry.Products are designed and manufactured to last,and align with the business model that will deliver them.Products and their materials are free from hazardous substances.Production and use of products do not discharge hazardous substances into the environment.Production is fully decoupled from the consumption of finite resources:the need for virgin resources is minimised by increasing the use of existing products and materials.Where virgin input is needed it is from renewable feedstocks sourced using regenerative production practices.Products and their materials are designed and manufactured to be disassembled so that they can be reused,remade,and recycled.Products are,in practice,collected and sorted to be reused,remade,recycled,and where relevant and after maximum use and cycling safely composted.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES13In delivering the vision,the rights and equity of all people involved in the textile industry are prioritised.In a circular economy,textile products are:PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES14Establishing and expanding separate collection infrastructure for textiles is a necessary part of the solution.To divert textiles from landfill,incineration,or leakage into the environment,it is crucial to build collection infrastructure at scale.Waste management systems need to collect textiles separate from other waste streams segregating them at source as this is critical to achieving high reuse and recycling rates.When textiles are mixed with other types of discarded materials,they are prone to contamination,rendering them unsuitable for reuse and recycling.Separate collection is the only way to keep textiles out of municipal solid waste streams.14 When textiles are discarded within mixed municipal solid waste,they end up incinerated or landfilled,causing pollution and increased GHG emissions.Collecting textiles separately from other waste streams is the first step to keep these products and materials in use,creating economic value and lowering emissions.A recent study has shown the emissions reduction potential across one region to be as high as 40%CO2e compared to non-separate collection of textiles.15 Today,separate collection rates for textiles are low.Collection infrastructure for discarded textiles is underdeveloped and does not capture all textiles in the system.Where reporting is available,separate collection rates are on average 14%and reach a maximum of 50%(see Appendix B).This means that in countries where separate collection is in place,more than half,and in some countries more than 80%,of textile products placed on the market are still discarded as part of municipal solid waste streams,and therefore end up incinerated or landfilled.This is largely due to the fragmented nature of textile collection systems,which are operated by a range of commercial as well as charitable actors,and which all generally require a bring-back effort from citizens.Curbside collection,as is in place for packaging for example,is generally not available for textiles due to their infrequent and unpredictable disposal patterns.In addition,textiles are particularly prone to contamination and weather conditions,favouring bring-back operations through clothing containers or stores.Existing systems for separate collection frequently focus on collecting clothing that is deemed rewearable and therefore suitable for reuse.Collected textiles are sorted into hundreds of different grades or fractions,with diverse quality grades indicating their potential market value for sale onto reuse or downcycling markets.In the current model,collectors and sorters rely on the reusable clothing fraction to offset losses incurred in managing non-reusable textiles.As a result,current collection efforts generally seek to limit reception of non-reusable textiles,for example by communicating to citizens that they can only take in textiles that are in good condition.Fixing a leaky systemPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES15Today,the share of reusable textiles is around 60%on average for European sorters,and is high enough to ensure a positive operating margin.However,if the share of reusable textiles falls under 45%,sorters operating margin would become negative,based on current market prices for sorted textiles.16 This decrease is likely to occur in the coming years,17 due to:1 The expected increase in the volume of separately collected textiles,including those with no reuse value.In the European Union,separate collection of textiles will become mandatory on 1 January 2025,as per the 2018 revision of the EU Waste Framework Directive.This is expected to result in a higher share of non-reusable textiles entering separate collection systems.2 The uptake of circular business models that keep products in circulation for longer.Citizens participating in these models,particularly peer-to-peer resale platforms,will be less likely to discard their reusable products through separate collection systems,instead reselling them directly to others.This can reduce the volume of reusable textiles entering collection and sorting systems.Sources:Ellen MacArthur Foundation analysis based on data from Fashion For Good and Circle Economy(2022),McKinsey&Company(2022),EigenDraads(2022)20%05EPU%-50-25025Share of reusable textiles per Kg sorted(%)Average margin per Kg sorted(cents)Figure 1In Europe,the operating margin of the average sorter hinges on the share of textiles that,after sorting,can be sold to reuse marketsPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES16Where clothing is collected separately,the vast majority is exported.More than 80%of reusable clothing collected through formal collection systems is exported after sorting(see Appendix C).The global trade in used clothing has increased significantly in the past few decades(see Figure 2).18 The OECD estimates that roughly one-third of OECD used clothing exports are traded within the OECD,and two-thirds are destined for non-OECD countries.19 In 2021,OECD countries made up 71%of global used textile exports.20 A small number of countries contribute to the majority of exports,for example in 2021,80%of exports were generated by just 16 countries.21 In some geographies,vast amounts of textiles are not sorted domestically,but are exported in aggregate for sorting in third countries.22 For example,recent studies have shown that 55%of textiles collected in the Netherlands are exported for sorting in other countries.23 In the USA,only a few sorters remain operational within national borders,and the vast majority of collected textiles is thought to be exported for sorting in Central-and Latin-America.24The global used clothing trade leads to a disproportionate waste management burden on importing countries.While reuse exports lead to increased value capture and utilisation of clothing,they also cause a disproportionate waste management burden on importing countries,which often lack the infrastructure to manage clothing when it is no longer reusable.In Ghana,for example,the importation of used clothing increased by 140.5tween 2000 and 2021,25 while waste management infrastructure for textiles has remained stagnant.26 The lack of infrastructure to manage textiles after their use phase often results in the incineration,destruction,and landfilling of textile products,losing the intrinsic value of the materials embedded within them.In Tunisia 8.7%of the solid waste disposed of in landfills is textiles,almost as high as the share of plastic waste(9.4%).27 While used clothing is traded for reuse,not all used clothing is reused in practice.A proportion of imported clothing is never sold to consumers due to limited demand or low quality.This means that a proportion of clothing imports become waste on arrival.28 In todays system,there are no standardised sorting processes or outputs,and we lack a common language to understand the categories and qualities that discarded textiles can be sorted in.This leads to a general lack of visibility and reporting on the outputs of sorting processes,for example as to the share of reusable versus non-reusable textiles collected.In practice,this means that importers of textiles lack the ability to monitor,inspect,and report on the market value of the products they receive.The global trade of used clothing has economic and social consequences for workers in sorting,grading,and reuse sectors,in particular in importing countries.Todays global reuse economy is an industry of precarious employment and small profit margins.29 In importing countries,sorters,graders,traders,and sellers of reusable clothing deliver a significant contribution to the circular economy,but they largely do so in precarious work conditions,and for a low income.As informal workers,they generally experience job uncertainty and instability,which is heightened by improperly sorted textiles.Profitability is severely challenged when a proportion of the bales imported as reusable clothing is not sold due to low quality,inexistent market demand,stains,or damage.The volatility and uncertainty of jobs in the used clothing trade has been widely documented,and predominantly affects women.30PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES17Figure 2Historical overview of the global used textiles trade0060002004500150300010015001990199020002000201020102020202050Volume of global imports(kT)Global imports of used textilesGlobal exports of used textilesVolume of global imports(kT)Total number of countries reportingTotal number of countries reporting00600020045001503000100150050Number of countries reportingVolume of imported textilesPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES18To fix this leaky system,the economics for separate collection need to stack up.The current economic model for collecting discarded textiles faces significant pressure.Across different geographies,textile collectors and sorters currently report challenging profitability(see Figure 3).With more and more new items of clothing being placed on global markets,resale markets are becoming increasingly saturated.At the same time,collectors widely report a decline in the quality of the products they receive,which diminishes their suitability for resale and reduces their selling price.31 In Europe,sorters are widely reporting financial strains,attributed to a mix of factors including a global drop in sales and global trade disruptions,such as the Red Sea shipping crisis,resulting in increased freight costs and longer delivery times.32Market demand for recycled textile inputs remains limited.In addition to a difficult resale market,the economics for separate collection and sorting are further challenged by a limited demand for textile recycling.When discarded textiles are worn out,damaged,or stained,they are generally considered unsuitable for reuse.Today,these products are usually downcycled into lower-value applications,such as insulation material,wiping cloths,or mattress stuffing.Recycled content from textile sources is minimal.As an example,almost all recycled polyester is from recycled PET bottles and not recycled polyester.33 The economics are further challenged by the cost of landfill and incineration,as not all collected textiles can be reused or downcycled.In geographies with limited incineration or landfill capacity,this can lead to textiles being abandoned in the environment,which impacts local communities,as it causes soil degradation and pollution of waterways.To establish separate collection systems at scale,structural funding is needed to cover the net cost associated with managing all discarded textiles,not just the fraction with high market value.Where separate collection systems are in place,they are largely funded through the reusable clothing fraction,which is traded all around the world.This market-driven system faces significant pressure,and will not achieve further expansion nor material capture unless dedicated funding is put in place to cover the cost.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES19Figure 3The business case for sorters in Europe,Kenya,and IndiaWhile sorters are able to turn a positive operating margin for reusable clothing,the non-reusable clothing fraction (sold to downcyclers or recyclers)is operating at a loss,based on current market prices.See Appendix E for a detailed breakdown of the values reported in this figure.872528EuropeKenyaIndia-68-63-33-40-18-930100-2575-5050-7525-100cents/kgMargin generated by the reusable fractionMargin generated by the non-reusable fractionMargin generated by the waste fractionPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES20Low transparency on product and material flows creates a number of challenges.Material flows in the textile waste stream are complex,opaque,and transboundary.Textiles flow across borders after use,at times crossing dedicated economic zones for sorting and processing,and may be exported several times within one products lifetime.We currently lack crucial insights into these global material flows and where discarded textiles ultimately end up,when they are no longer deemed suitable for reuse or recycling.The available reporting across locations is scattered,inconsistent,and incomplete,making it largely unreliable for comprehensive analysis and decision-making.While commodity codes allow for some traceability of internationally traded textile products,these are difficult to analyse and lead to a fragmented understanding of the scale of the trade,as they typically do not cover transit hubs nor trade spanning across multiple countries.To build a circular economy for textiles,accurate reporting and measurement is needed.Governments have long overlooked textiles as part of municipal waste management regulations,because donated or discarded textiles have often not been classified as waste.Many governments have only recently begun to measure textile waste volumes.Few have set targets on the collection,reuse,or recycling of textiles.In most countries around the world,businesses are not required to report on the products they place on the market,nor on where these products may end up after first use.Collectors and sorters are often not required to report the tonnages they collect,and composition analysis of the textiles they collect and sort is carried out episodically,as part of time-bound projects,but not in a structural manner.The non-profit and informal sectors play a significant role in textile recirculation but are usually not accounted for in official data,leading to further fragmentation.As a result,collection processes and their performance remain poorly understood.Achieving common definitions of“waste”versus“product”is a crucial step to achieve recirculation systems for textiles at a global scale(see Box 4).Today,national and regional scope definitions34 of“textiles”and“textile waste”vary widely.The Harmonized System,a legal instrument that classifies 98%of global trade,foresees two codes pertaining to used textiles:code 6309 worn textiles and clothing,and code 6310 sorted and unsorted used rags and textile scraps.In general,code 6309 covers reusable textiles,while code 6310 covers non-reusable textiles that may or may not have been processed into other products(e.g.cleaning rags).35 However,it is widely assumed that both reusable and non-reusable textiles are traded under the 6309 commodity code,creating a blurry reporting landscape on import and export data of used textiles.36 The lack of common language and reliable data presents significant barriers to investment.Only through obtaining access to standardised and reliable reporting data can we begin to understand and map out global material flows for textiles,including disposal pathways and the associated social,economic,and environmental impacts.Such data is crucial to carry out market research and estimate the prospects of investing in reverse cycle activities for textiles,and in building the after-use collection,sorting,and recirculation infrastructure required.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES21Significant investments are required to collect and recirculate textiles after use.Significant investments are required to create separate collection,reuse,and recycling infrastructure at scale.The economics and output quality of existing sorting processes and textile-to-textile recycling technologies need to be drastically improved.These investments need to happen alongside industry-focused efforts on scaling circular business models,such as resale,rental,repair,and remaking,which keep textiles in use for longer and decrease the volumes of textiles ending up in separate collection systems in the first place.Sorting facilities need to expand their operations and need further investment in machinery and equipment.Todays sorting operations are largely built for resale markets and rely on manual labour.They require further investment to deliver tailored feedstocks for textile recycling.This requires the ability to segregate textiles by fibre content,colour,weight,and fabric structure,meeting feedstock specifications for recycling processes in sufficient quantities.It also requires a focus on investment in pre-processing equipment,to remove components that disrupt recycling.A combination of demand and supply-side measures is needed to deliver textile-to-textile recycling at scale,and drive down the industrys demand for virgin resources.Over the last few years,brands and retailers have publicly committed to circular economy targets which among other measures,such as the adoption of circular business models include the use of post-consumer textile-to-textile recycled content in all their products.37 However,todays available supply of post-consumer recycled content is much smaller than the amount required to meet these commitments38 and recycled textile fibres are almost always more expensive than virgin fibres.39 Spending on infrastructure should be a balancing act,examining short-term needs and longer-term considerations.While the above estimates are helpful to understand the scale of the investment needed if material consumption were to stay at current levels,it is important to stay focused on the need to bring down volumes of discarded textiles over time.Infrastructure investments should consider the ambition to achieve a circular economy,in which products and materials are kept in use and waste is prevented at source,to avoid lock-in effects or stranded assets in the future.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES22Transforming the textiles system requires a collective solution,supported by mandatory policy.To make the economics work for separate collection,sorting,reuse,and recycling,a collective solution is required,based on mandatory policy.Voluntary business action plays a crucial role in innovating and showing what is possible,but in itself it is not sufficient to deliver transformative change.Reliance on voluntary action,in the absence of direction-setting policies,leads to a fragmentation of efforts across the industry.The reality is that when action is voluntary,it fails to create a level playing field and can even discourage businesses from making the investments required,as they fear a competitive disadvantage.Converging efforts on circular product design is a crucial step in scaling up reuse and recycling,but the lack of harmonisation has slowed down progress.Common approaches and ambition levels on durability,recyclability,and material selection(including blends)are required to build systems that can keep textile products and materials in use for as long as possible.Policymakers have an important role to play in building common standards,underpinned by a robust evidence base.For example,product policies can drive alignment on a minimum ambition level and can help overcome information gaps between product design and what happens at the end of a products first use phase.Alongside product design,sharing infrastructure is key as it provides economies of scale.Circular business models for textiles often encounter economic challenges due to the labour-intensive and inefficient nature of todays collection and sorting systems for textiles after use.Todays supply chain and infrastructure which were originally designed for a one-way flow of products from design to use to waste need to be transformed into a connected supply network with multi-directional transactions.No single actor can achieve such systemic change alone.Mandatory Extended Producer Responsibility(EPR)policy is a necessary part of the solution.In a circular economy for textiles,businesses contribute to supporting infrastructure,commensurately with what they put on the market,to ensure their products are collected and reused,remade,or recycled into new textile products.EPR is a critical policy lever to make this happen in practice and at scale as it places responsibility on producers with regard to the collection,sorting,and after-use management of the goods they put on the market.Without mandatory EPR policies in place,it is unlikely that collection and sorting systems for textiles will reach the scale needed to manage the current volumes of textiles in the system.To build a circular system,separate collection infrastructure needs to scale rapidly,with optimised sorting and tracking processes.In a world of finite resources,EPR policy helps create new sectors and employment dedicated to reverse cycle activities,such as collection,sorting,reuse,repair,and recycling.If designed well,EPR policy can significantly improve the costrevenue dynamics for separate collection,reuse,and recycling,while delivering transparency and collective action towards a circular economy for textiles.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES23Figure 4Map of existing and emerging EPR systems for textiles,globallyAdopted mandatory France,Netherlands,HungaryAdopted voluntary Australia,ColombiaProposed European Union,California,New YorkDebated*Kenya,Chile,Ghana*Non-exhaustive listPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES24Extended Producer Responsibility:a necessary part of the solutionMandatory,fee-based EPR is a necessary part of the solution.The collection and management of used textiles comes at a cost,and this cost is currently higher than the revenues made,as only the reusable fraction is profitable.Any collection scheme aiming to collect all textiles not just the high-quality,high-value reusable fraction requires dedicated funding to cover this cost and keep textiles out of the waste stream or,worse,the environment.Extended Producer Responsibility(EPR)policy is a well-known policy tool that has been widely adopted in a range of sectors,including electronics,packaging,vehicles,and tyres.While it is hard to isolate the impact of EPR policy from the potential effects of complementary policies,the available data40 indicates that EPR schemes have a positive impact on the collection,sorting,and recycling rates of products in scope.Mandatory EPR systems are generally found to be more effective than voluntary ones,as they involve better monitoring and enforcement.41 In comparison to voluntary schemes,mandatory EPR systems have the advantage of targeting the entire industry equally.In addition,research indicates that organisational EPR systems are more effective than financial ones,42 as they require a stronger involvement of obligated producers in operationalising their responsibilities,resulting in a higher likelihood of covering the full range of costs involved in meeting the targets.EPR is a necessary part of the solution to build a circular economy for textiles.Over time,the economics can be improved significantly through circular product design,technological advancements,and economies of scale.When textile products are designed for prolonged use and recycling,this will result in significant efficiency gains and cost-per-unit savings for sorting,disassembly,and recycling operations.For many years to come however,mechanisms that ensure dedicated,ongoing,and sufficient funding will be necessary to cover the net cost of managing discarded textiles.No EPR0102030405060708090Limited or VoluntaryMandatoryCollection for recycling rate(%)Figure 5 Evidence from the plastic packaging sector:Collection-for-recycling rates are significantly higher in countries with mandatory EPR for plastic packaging than those in countries with no EPR,as well as with limited or voluntary EPR43PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES25Figure 6Mandatory,fee-based EPR offers four key benefitsEPR provides dedicated,ongoing,and sufficient funding for separate collection and sortingEPR attracts capital investments in the infrastructure needed to reuse and recycle at scaleEPR creates transparency and traceability on global material flowsEPR spurs collective action towards common targets for collection,reuse,and recyclingIf designed well,EPR policy is the only proven pathway to provide funding that is:Dedicated to collecting and processing textile products after use.Funding is allocated to a clearly defined set of activities(such as collection,sorting,reuse,and recycling of textiles)and cannot be reallocated to other activities.Guaranteed on an ongoing basis to ensure the continuous operation of a system at the scale and level needed to meet the challenge.This is as opposed to one-off investments,which are inadequate to cover long-term infrastructure development,maintenance,and operations.Sufficient to execute the defined scope of activities.EPR funding evolves in line with the net cost of operating the system,which may vary according to factors such as changes in the amount of textiles placed on the market,technological innovations,market prices for sorted materials,or progressively evolving objectives.EPR offers a collective solution to cover the net cost associated with managing discarded textiles.When EPR is mandatory(i.e.contributors cannot opt out),it guarantees an ongoing funding stream.The fees are tied to,and evolve with,the net cost of achieving the targets set out in the EPR regulation(i.e.they are performance-based).As a result,EPR funding is sufficient to cover the costs of managing all textiles in scope.In particular,EPR policy helps achieve more accurate and granular sorting operations.In todays system,small margins often mean that sorters cannot afford to create a highly accurate and granular segregation of discarded textiles into different degrees of quality,material purity,material types,colours,and other specifications.Improper sorting negatively affects the economics of actors down the chain,and ultimately leads to textiles ending up in landfill and incineration,due to the absence of a reuse or recycling market.Improved sorting is a key enabler for scaling reuse and recycling economies,and generates important employment opportunities,as sorting is expected to remain labour-intensive for the foreseeable future.EPR provides dedicated,ongoing,and sufficient funding for separate collection and sortingFigure 7Evaluation of various funding mechanisms against the criteria of being dedicated,ongoing,and sufficientDedicated OngoingSufficientPublic funding through general national or local government budgets allocated towards collection,sorting,and recycling,or disposal.NoPartiallyNoVoluntary funding provided by businesses,philanthropists,or other sources towards voluntary EPR schemes,or any other initiatives to improve the collection,sorting,and recycling of textiles.YesNoNoMandatory fee-based EPR schemes,as described in Box 2.YesYesYesPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES26PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES27The establishment of mandatory EPR policy can unlock capital investments in the infrastructure required to collect,process,and recirculate discarded textiles.While EPR schemes and related fees cover operational expenditures,they also create the right enabling environment and build confidence for capital expenditures in long-lived assets,such as collection infrastructure and automated sorting facilities.In countries where existing infrastructure is insufficient to meet targets set by the EPR scheme,PROs have commonly invested often by sharing the investment with private sector operators in bins,trucks,sorting equipment,and recycling facilities to meet EPR targets in sectors such as packaging,vehicles,tyres,oils,and electronics.44Crucially,by covering the costs of separate collection and sorting,EPR policy creates investor confidence in the market opportunity for reuse and recycling.EPR policies significantly improve the economics for sorters in particular,who currently face profitability challenges.This means the rationale for reuse and recycling is much stronger,as sorted feedstocks are delivered at a low cost.In addition,because they are legally required to meet EPR targets on collection,sorting,reuse,and recycling,brands and retailers(often organised in PROs)engage in lasting contracts with private operators,guaranteeing the operators a minimum number of years of operations,and therefore steady returns on their investments.45 By driving an increase in collection rates,sorting capacity,and therefore the availability of good-quality textile feedstocks,EPR policy can create the stability of supply and economies of scale needed for investments in large-scale assets.46 Without a growing and consistent availability of high-quality feedstock for textile-to-textile recycling,it is not possible for sorters and recyclers to invest in capital-intensive assets,such as buildings and machinery,that are required to increase their processing capacity.According to a National Institute of Standards and Technology(NIST)report,US recyclers need to be assured of collecting 35 kilotonnes of textiles per year in order to invest the USD 2025 million needed to build a new plant.47EPR attracts capital investments in the infrastructure needed to reuse and recycle at scalePUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES28EPR policy creates improved transparency and traceability with respect to textile products placed on the market and the pathways these follow when they are discarded.EPR policy mandates industry-wide reporting on products placed on the market.Reporting by obligated producers creates visibility on the collection,reuse,and recycling rates,as well as the fraction that ends up in final disposal.In this way,EPR creates the transparency that is crucial for governments and businesses to measure progress and take more informed and targeted actions and decisions.48 For example,the French EPR scheme for textiles has heavily invested in compositional analysis of non-reusable textile waste,49 in order to understand the typology of textiles that could enter recycling processes.This understanding is crucial to inform the development of more targeted solutions,for example by adapting eco-modulation criteria to favour recyclable textiles over non-recyclable ones,or by informing R&D funding decisions to accelerate the development of new recycling technologies.EPR creates transparency and traceability on global material flowsPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES29Mandatory EPR regulations offer a framework for setting and enforcing legally binding targets on operations such as collection,sorting,reuse,and recycling,as well as waste prevention and reduction.When targets are legally binding,they create confidence and stability for long-term planning and investment.This way,brands,retailers,manufacturers,collectors,and sorters operating in the same market can all work in a concerted manner towards the achievement of set targets and objectives,and can measure progress against a shared framework of targets and metrics.Setting and incentivising strong circular economy targets,based on the polluter pays principle,50 can disincentivise todays linear approach to managing textiles,particularly products that are discarded before the end of their useful life.By putting a price on waste generation and pollution through the use of fees,EPR is a key mechanism to internalise these externalities and bring them into the market mechanism,providing a powerful incentive to help level the playing field for circular business models.EPR spurs collective action towards common targets for collection,reuse,and recyclingPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES30EPR policy design:a common direction of travelAchieving a widespread uptake of EPR policies,in an aligned manner across borders and jurisdictions,is crucial to build a global circular economy for textiles.Without a coordinated approach,national and subnational EPR policies risk fragmentation and ineffectiveness.Brands and retailers the obligated producers under EPR schemes have reach into consumer markets spanning multiple countries,while textile products flow across borders after use.Against this backdrop,a coordinated approach to EPR policy ensures aligned action,reporting,and measurement across governments.Importantly,a common approach to EPR can ease reporting requirements for obligated producers,enhancing compliance and effectiveness of the system in place.51 This is particularly relevant for SMEs that lack the resources and capacity to navigate compliance across multiple markets.This report proposes a common approach to EPR policy design for textiles,based on circular economy principles.This approach focuses on aligned definitions,key objectives,and the involvement of stakeholders:Establish aligned definitions(including,but not limited to:product scope,obligated producers,cost coverage,and waste hierarchy)Aspire to four key objectives,setting national or regional targets for each,including:Increase collection volumes Increase reuse rates Increase recycling rates,and Reduce waste volumes Facilitate stakeholder involvement.The framework proposed in this report is based on key learnings that have emerged from decades of implementing EPR policy in other sectors.It also draws on the EPR systems for textiles that are already in place or under development(see Figure 4).We recognise that establishing EPR provides a starting point,and the policy needs to evolve over time.For systems that are already in place,we recommend exploring pathways to“maximise the opportunity”(see pp.39)and push the boundaries of EPR policy towards transformative circular economy outcomes.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES31International alignment is key for EPR to be at its most effective.At the same time,such alignment needs to balance the needs of EPRs(sub)national implementation.Collection rates,sorting capacities,and reuse and recycling rates all vary significantly,both nationally and regionally.For this reason,global objectives should translate into specific national,time-bound targets,based on the specific context of implementation.To ensure comparability,these targets should however be based on the same reporting and measurement methods.EPR policy should be designed to complement and be integrated into existing waste management systems.The conditions and considerations for designing and implementing effective EPR systems differ significantly between industrialised countries with established formal waste management systems and many countries in the Global South where workers in informal and cooperative settings,including waste pickers,constitute a large share of the textile reuse and recycling economies.Beyond the remit of EPR policy,achieving common definitions of“waste”and“product”would help remove unintended barriers.Today,waste legislation is a key determinant of the pathway of textile products and materials when they are discarded.Waste classifications can enable or hinder activities related to reuse,repair,or recycling.A common understanding around when,for example,a garment or a curtain is a reusable product(suitable for reuse or repair)or instead waste(to be directed to recycling or waste management)is key to enable cross-border resource flows and to support the uptake of circular business models.Agreeing on waste definitions would particularly enable an improved reporting landscape and a more accurate understanding of todays global material flows for textiles (see Box 4).BOX 4 Achieving common definitions of waste A prerequisite for establishing an effective mandatory EPR scheme for textiles is to be able to clearly distinguish what constitutes waste and what constitutes a product.Harmonising and simplifying global definitions and applications thereof is key,in order to clearly delineate where EPR obligations begin and end.Discarded textiles travel across the world after collection and sorting,with little clarity about whether they are classified as waste or product.For example,in some countries the separate collection of discarded textiles is officially considered as waste collection,but these textiles can regain their product status after sorting.In other countries,separately collected textiles are not considered waste and therefore always remain a product as per the legal classifications.The designation of“waste”has important administrative impacts,entailing a complex set of legal obligations,different in each jurisdictional context.It is crucial to redesign and fully mobilise existing international agreements pertaining to waste,in order to set the right enabling conditions for the circular economy transition.In addition,the ongoing negotiations for a legally binding the UN Plastics Treaty offer an unmissable opportunity to develop global rules on waste and pollution for plastics,which will critically influence the development of textile waste policies.Across all these efforts,active involvement and participation from countries that import high volumes of used textiles and other used goods(in particular non-OECD countries)is essential.Key focus areas include:1 Revise the Harmonized System(HS)and relevant HS codes to classify used textiles and textile waste.The Harmonized System is the legal instrument that is the universal basis for customs tariffs and the international trade statistical system.The HS Nomenclature is currently used by 211 economies and over 98%of global trade in goods is classified in terms of the HS.It is updated every five years in light of developments in technology and changes in trade patterns.To enable a clearer demarcation between the product and waste regimes for textiles,PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES32relevant HS codes pertaining to used textiles(6309 and 6310,see page 20)should be revised and updated.The codes should also align with other global frameworks such as the Basel Convention.Currently,the HS system has 291 distinct six-digit codes covering new textiles compared to one code covering all used textiles and two covering all textile waste.Proposals have recently been made to create codes for upcycled textile products as well as textiles containing recycled content.52 These proposals should be brought into consideration in the upcoming review cycle carried out by the World Customs Organisation,starting in 2025.2 Utilise the Basel Convention to align export and import flows with resource management capabilities.Adopted in 1989,the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal is the most comprehensive global environmental agreement on hazardous wastes and other wastes,and has almost universal membership.Recent amendments were made to better regulate the trade in plastic waste and e-waste,while the introduction of a new listing for textiles is currently the subject of debate.Interpretations of the plastic amendments vary and it is currently unclear to what extent existing plastic amendments can be used to restrict the transboundary movement of textile waste that is primarily or fully composed of plastic-based fibres and materials(e.g.buttons).This points to a wider debate asking whether textile waste can be considered a form of“embedded plastic waste”,i.e.plastic waste that is“part of used products that have not been dismantled,shredded,or sorted into separate material fractions”.53 In addition,the ubiquitous confusion between“used textiles”and“textile waste”further complicates the debate on how the Basel Convention should address textile waste,as the Conventions mandate applies to waste,and not used products.For countries to successfully implement obligations under the Basel Convention,continued technical and financial support is critical.Unlike other multilateral environmental agreements,the Basel Convention does not have a stable financial mechanism for capacity-building and technology transfer.To adequately address textile waste under the Basel Convention,capacity and logistical hurdles need to be better understood and addressed,for example in the area of the recently adopted amendments for e-waste and plastic waste.Among other things,efforts are underway to analyse and improve implementation of the Prior Informed Consent(PIC)procedure,and to ease its administrative burden for national customs authorities and administrations.The Basel Convention can play a significant role in bringing parties together to create necessary clarity on the delineations of“textile waste”and its relationship to“plastic waste”.Provided legal clarity is created on these fronts,the Convention can be a powerful tool to impose restrictions on the export and import of those textiles that are contaminated or very difficult to recycle.It can also play a pioneering role by establishing guidelines on the Environmentally Sound Management(ESM)of textile waste.Ultimately however,the Conventions effectiveness depends on the ability of countries to implement and enforce provisions in a coordinated manner,and on the presence of,and alignment with,upstream policy measures that seek to stimulate circular design and to extend the lifetimes of textile products placed on the market.3 Establish a Global Waste Observatory,based on an internationally agreed methodology for collecting and reporting waste data.As outlined in the most recent Global Waste Management Outlook,54 the lack of standardised measurement and reporting methods on municipal solid waste leads to a fragmented or missing picture of the scale of municipal waste flows.Today,it is impossible to make adequate estimates of the total volume of textile waste generated by households,the share of textiles that is mixed with other waste materials as part of municipal waste,or the share of textiles in controlled landfills or incineration plants.We echo UNEPs call for a Global Waste Observatory which would serve to align measurement approaches and enable better decision-making on waste management services and infrastructure.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES33EPR policy design:a common approachThis report proposes a common approach to EPR policy design for textiles,based on circular economy principles.This approach focuses on aligned definitions,key objectives,and the involvement of stakeholders in shaping and implementing EPR policy for textiles.Figure 8EPR policy designPRODUCT SCOPE Clothing Footwear Household textilesOBLIGATED PRODUCERS National brands and retailers International brands and retailers Online brands and retailersCOST COVERAGEBased on net cost principle:Collection Sorting Preparation for reuse and recycling Reuse and recycling In addition,EPR schemes should cover the costs of:Residual waste treatment Data gathering and reporting Informing citizens Administrative costs1.Establish aligned definitions2.Set global objectives and(sub)national targets3.Facilitate stakeholder involvement DISCARDED TEXTILESCOLLECTION VOLUMESREUSE RATESRECYCLING RATESWASTE AFTER COLLLECTIONMIXED RESIDUAL WASTEPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES341.Establish aligned definitionsDefinitions in legal texts are powerful provisions,as they warrant the application of EPRs regulatory framework to the economic and social reality on the ground.Establishing legal definitions that are in alignment across jurisdictional borders can be an extremely significant driver for change,as it enhances transparency,reduces transition costs,removes unintended barriers,and facilitates compliance.In EPR policy,a wide range of concepts,such as“collection”,“sorting”,“reuse”,and“recycling”require clear definitions in the legal framework.By way of example,and with no intent to be exhaustive,this report includes recommendations around the following four definitions:Product scope Obligated producers Cost coverage Waste hierarchy for textiles.PRODUCT SCOPEFor national textile EPR schemes to be most effective,they should cover all clothing,footwear,and household textiles placed on the countrys market.Clothing,footwear,and household textiles can be grouped together in the same product scope,as they are all consumed by households and they largely enter a shared infrastructure for collection and sorting after they are discarded.This scope definition excludes other product categories that also contain textile fibres such as mattresses,technical textiles,and furniture with upholstery as they are generally addressed by separate EPR schemes,and require significantly different collection and sorting systems.To incentivise circular economy approaches,policymakers can consider the inclusion of used(second-hand)products in the scope definition.Including used products in the scope definition helps ensure visibility of what is placed on the market,and helps deliver funding that is sufficient to cover the various collection and sorting cycles these products may undergo.This is particularly relevant for countries that import high volumes of used textiles,in particular clothing.Where used products are included in the scope,they should be subject to significantly lower EPR fees compared to new products.Considering the relationship between the EPR fee and the sales price of the product(generally lower for used products),and the need to stimulate uptake of reuse business models,used products can be exempted in the short term,until the reuse market gains maturity,at which point they need to be included in the product scope to ensure appropriate waste management financing.OBLIGATED PRODUCERSTo assign“extended”responsibility,the legal framework should clearly define the actors that are considered“obligated producers”and that are legally required to meet the objectives and targets set out by the EPR policy.This definition should include all actors placing products on the market,including national and international brands and retailers,regardless of their sales channel(physical stores or online).This is crucial to ensure that all products placed on the market are covered,whether introduced by local actors,importers,or online retailers.55 The definition should clarify in which instances online marketplaces are considered producers.56 Policymakers could consider de minimis exclusions57 for individual sellers and micro-enterprises placing products on the market,in particular for second hand(used)products.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES35COST COVERAGEBased on net cost principle:Collection Sorting Preparation for reuse and recycling Reuse and recycling In addition,EPR schemes should cover the costs of:Residual waste treatment Data gathering and reporting Informing citizens Administrative costsAn EPR system operates on a net cost basis.In principle,the legal framework outlines specific activities and objectives,such as collection and sorting,that need to be undertaken and achieved by obligated producers.The fees are based on the net cost of achieving said objectives.It is important to establish feedback mechanisms,so that costs can be adapted in view of external factors impacting the management of the EPR scheme(such as rising energy costs).If the contributions paid into an EPR system are not sufficient to cover all operations,then it can create a perverse incentive to reduce the volume collected in order to save costs.As a minimum,EPR fees should cover the net cost of collection,sorting,reuse,and recycling.In addition,EPR systems should cover the costs of managing textiles that are discarded within the municipal solid waste stream.EPR systems should also be equipped to carry out data gathering,reporting,and communication activities,and they should cover relevant administration costs to manage the system.Obligated producers should be involved in the process of setting EPR fees,and have access to a transparent breakdown of them.EPR systems need to invest in communication activities,to ensure citizens are aware of the opportunity to bring back all textiles,including non-reusable ones.Today,as a result of existing collection schemes focused on reusable clothing,citizens generally believe that textiles should be in good quality and condition to be discarded as part of separate collection systems.58 To drive up collection rates,it is important to educate citizens and encourage segregation at source,keeping textiles out of mixed household waste.WASTE HIERARCHY FOR TEXTILESEPR policy should reflect a clear prioritisation of waste management pathways for textiles,in accordance with the waste hierarchy.Among other things,this should prioritise reuse over recycling wherever possible,as well as a clear priority for textile-to-textile recycling over recycling into other applications.Recycling is an important part of a circular economy,yet the loss of embedded labour and energy,and the necessary costs to make products from their raw materials,mean that it is a lower-value process than reuse,repair,and remaking.Where recycling is the necessary pathway,keeping recycled outputs within the textiles industry is the preferred option,to stimulate design for recyclability,materials innovation,and demand for recycled inputs.Only where textile-to-textile recycling is not feasible should textile materials be cascaded into other applications and industries as secondary raw materials.The technological and economic maturity of each recycling method should be considered when prioritising recycling approaches for different textile materials.The circular economy principle of circulating materials at their highest value generally favours mechanical recycling methods for textiles,as they retain the structural integrity of fibres.However,there are a number of key considerations to be taken into account for each method,such as differing degrees of carbon,water,chemical intensity,59 and varying quality of recycled output.60PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES362.Set global objectives and(sub)national targetsTo fully realise the potential contribution of EPR to a global circular textiles economy,a set of global objectives is required,creating a common direction of travel.While these objectives aspire to be globally relevant,national and subnational governments should set specific,time-bound targets for each objective,taking into account policy legacies,infrastructure availability,and the wider stakeholder landscape of their jurisdiction.Targets should be reviewed regularly,enabling policymakers to raise ambition over time.EPR in itself does not automatically lead to circular economy outcomes but ambitious targets can.Where EPR schemes are already up and running,consideration could be given to a differentiation of targets across product groups.For example,reuse targets could be higher for jeans and accessories than for footwear,reflecting differences in their respective end markets for reuse.Applying this approach will require a sound reporting feedback loop,enabled by the use of digital product passports or similar traceability mechanisms.This report recommends the following global objectives for EPR for textiles:1 INCREASE COLLECTION VOLUMES Increase absolute volumes of discarded textiles that are separately collectedExpanding existing collection systems,and creating new ones where they do not exist,is crucial to divert textiles from mixed municipal waste streams and to avoid leakage into the environment,and the associated environmental,biodiversity,and health impacts.Increased collection plays a critical role in a circular economy for textiles at least in the medium term,until resale and repair business models have been more widely adopted.Over time,targets can be adjusted to reflect improvements in collection infrastructure and in the uptake of circular business models.Care must be taken when measuring collection rates relative to market placement,in particular when using the results to inform target-setting.In practice,the separate collection rate is usually measured as the rate of textiles being collected relative to the amount of textiles placed on the market in the same or in the preceding year.While this method is helpful to build an understanding of capture rates,it is important to consider the very diverging timelines that may characterise the use phase of textile products with some items being used for a few days and others for a few decades before being discarded.For this reason,this report recommends measuring the absolute volumes of textiles collected separately,and setting targets on the absolute increase of such volumes.2 INCREASE REUSE RATES Within sorted textiles,increase the share of discarded textiles placed on reuse markets(with local reuse prioritised over exports for reuse61)To keep textiles at their highest value,they must be reused to the maximum extent,before being recycled.Practically,this objective can be measured as the share of textiles placed on reuse markets relative to the amount of textiles sorted.To deliver lifetime extension and to avoid negative externalities associated with the export of reusable textiles,efforts should be made,and targets set,to increase domestic reuse.After collection,reusable textiles are often exported to countries where reuse markets are already saturated,and the infrastructure to manage non-reusable textiles in an environmentally sound manner is limited.To minimise these“pollution transfers”,while also minimising the carbon emissions INCREASE COLLECTION VOLUMESINCREASE REUSE RATESINCREASE RECYCLING RATESREDUCE WASTE VOLUMESPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES37associated with shipping textiles across borders,EPR schemes should set targets on the minimum share of reusable textiles to be kept in circulation in local(or regional)reuse markets.3 INCREASE RECYCLING RATES Within the share of sorted and non-reusable textiles,increase the share of textiles placed on recycling markets(with fibre-to-fibre recycling prioritised over recycling into lower-value applications62)When reuse is not a viable option due to textiles being too worn out or the absence of an end market sorted textiles need to be recycled to keep their material value in the economy.Practically,this objective can be measured as the share of textiles being placed on recycling markets relative to the amount of non-reusable textiles post sorting.It is important to formulate this target in such a way that it does not incentivise textiles being diverted away from reuse markets when they are still in a suitable condition for reuse.EPR objectives should reflect a clear priority for textile-to-textile recycling63 over downcycling and cascading into lower-value applications.This could be reflected in a target on the minimum percentage of non-reusable textiles that is sent to textile-to-textile recycling relative to the total amount of non-reusable textiles,with the percentage increasing year-on-year as textile recycling capacity scales up.This is crucial to help decouple production from the use of virgin resources,and to send a demand signal for solutions that deliver ease of disassembly and recyclability by design.To further support this priority in practice,investments should be made into innovative sorting operations(capable of segregating materials in a cost-efficient manner)and recycling processes for blended textiles.4 REDUCE WASTE VOLUMES Reduce the overall volume of textiles entering landfill,incineration,or leaking into the environmentThe establishment of EPR policy and the above three objectives should lead to a decreasing share of textiles entering final disposal over time.Specifically,increased collection rates directly reduce the amount of textiles that are landfilled or incinerated as part of mixed household waste;and ambitious reuse and recycling targets directly reduce the amount of collected textiles for which(controlled)disposal is the only option.This reduction in waste needs to be measured in practice,against time-bound reduction(or diversion)targets.Measuring,and reporting on,waste reduction in absolute numbers is key to understanding progress.Practically,this can be achieved by regularly carrying out compositional surveys of the collected mixed waste from households,as well as through compositional research within landfill sites and incineration plants.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES383.Facilitate stakeholder involvement The design of EPR policy needs to consider the inclusion of the non-profit sector(charities and social enterprises)as well as the informal sector.EPR policy presents a significant opportunity to bring together circular economy and social objectives.For example,specific financing mechanisms can be put in place to support social and solidarity enterprises,as is the case in the French EPR system for textiles.64 To ensure inclusive EPR operations,the legal framework should ensure that PROs carry out open and transparent tendering processes.Workers in informal and cooperative settings,including waste pickers,play a critical role in facilitating the collection,sorting,reuse,and recycling of textile products and materials.In precarious conditions,they help draw more value out of textiles,but do so against the grain of a linear system that often means products are not designed for prolonged use.Importantly,informal workers often face a lack of recognition and an unstable labour market,as well as needing to rely on rudimentary equipment.65 The informal and unregulated nature of this work can pose concerns relating to the health of the workers involved,as well as the health of surrounding populations,due to exposure to potentially hazardous substances within textile products,such as heavy metals or water repellents.To deliver ambitious outcomes,EPR policy should be designed to complement and align with existing,largely informal waste management systems.It is important that the process of designing and implementing EPR policy includes participation from public authorities and municipalities,waste management service providers,and organisations representing workers in informal and cooperative settings,such as waste pickers.Among other things,the process should include due consideration on payments for services provided by informal workers,and should establish mechanisms to facilitate registration.66 Relevant factors also include access to health services,a guaranteed monthly income,and improved working conditions.67 As an example,in Chile,informal workers and waste pickers can register and formally take part in the EPR scheme under the 2019 EPR Decree for Packaging.Local authorities and informal waste pickers and recyclers have preferential status in the tender procedure to reach certification and registration.68 In addition,PROs are legally obliged to provide training and financial support to promote the inclusion of informal waste pickers and recyclers.69 PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES39Maximising the opportunity:designing EPR for a circular economyEPR policy is a starting point and needs to evolve over time to deliver circular economy outcomes.Designed as a waste management policy tool,EPR has historically focused on the end-of-life stage of the products in scope.EPR was not originally designed to cover the entire waste hierarchy,such as waste prevention and reuse.70 In practice,this means that EPR has led to increased collection and recycling rates,71 while its impact on product design has remained limited.72 In the packaging sector for example,where EPR is most established,EPR legislation did not historically challenge the short-lived and single-use nature of a wide range of packaging applications.In its current form,the implementation of EPR policy is incomplete,as producer responsibility stops at the point of export.When products are exported for reuse,the burden of their eventual waste management is transferred to a different jurisdiction,with no commensurate transfer of financial or technical support to do so.So far,because EPR policy is generally tied to the jurisdiction in which it is implemented,it has been unable to support waste management when this occurs elsewhere.To achieve a circular economy on a global scale,the idea of extending EPR beyond jurisdictional borders should be explored further.EPR has the potential to break away from its traditional downstream focus and deliver circular economy outcomes.This potential is currently underexploited.To ensure ambitious circular economy outcomes for EPR for textiles,policymakers can explore opportunities to:Stimulate circular product designManage waste beyond jurisdictional bordersExtend the use phase of textile productsExpand the scope of externalities coveredPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES40Stimulate circular product design Through the introduction of differentiated fees,73 EPR policy can stimulate circular product design,impacting crucial decisions on product performance and material choice.Fee differentiation allows for lower fees for products that meet circular design criteria,including aspects such as durability,recyclability,ease of disassembly,and inclusion of post-consumer textile-to-textile recycled content.Conversely,obligated producers pay higher fees when they place products on the market that do not meet these criteria.Fee differentiation can only be impactful when the fees are sufficiently ambitious.EPR fees need to give clear market signals and therefore need to be sufficiently high in proportion to the sales price or manufacturing cost.74 For example,it is argued that in the French textiles EPR scheme,changes in upstream design have been limited due to fees being too small relative to the products sale price.75Fee differentiation is most effective when based on mandatory product policies,which are part of the wider,regulatory landscape needed to enable a circular economy for textiles.76 Product policies establish standardised criteria on aspects such as durability and recyclability,setting a baseline ambition level that all industry players need to meet when placing products on the market.Aligning product policy criteria with those for fee differentiation in EPR schemes can create maximum impact,encouraging businesses to go beyond the minimum bar.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES41Extend the use phase of textile productsBy introducing a progressive fee structure based on the amount of new products placed on the market,EPR schemes can incentivise producers to adopt circular business models such as resale,rental,and repair while moving away from linear business models.In addition,applying lower fees to second hand products(compared to new products)can further encourage the uptake of reuse models.As demonstrated by the French EPR scheme,77 a proportion of EPR revenues can be mobilised to financially support repair operations.Beyond the fees directly applied by EPR schemes,complementary economic incentives can support the transition to a circular economy for textiles.This includes incentives to include recycled content(for example via product policies),VAT reductions on reuse and recycling activities or machinery,as well as GHG emissions pricing mechanisms.It can also include disincentives for non-circular outcomes,for example through landfill taxes,incineration gate fees,virgin materials taxes,or a textile disposal ban,as has been in place in the State of Massachusetts since 2022.78 Figure 9Illustration of the combination of a progressive fee structure based on the amount of products placed on the market with a differentiation of fees based on circular design criteriaBaseline feeFee differentiation based on circular design criteriaProgressive baseline fee based on amount of products placed on the marketPUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES42Manage waste beyond jurisdictional borders In its current form,the implementation of EPR policy is incomplete,as producer responsibility stops at the point of export.As such,when products are exported for reuse,the burden of their eventual waste management is transferred to a different jurisdiction.When these products are discarded after(re)use in a different market than the one they were placed on,the responsibility to ensure separate collection,sorting,reuse,and recycling is not fulfilled,as EPR policies are limited to their jurisdictional context.This gap is particularly relevant in the textiles system:the OECD estimates that roughly one-third of OECD used clothing exports are traded within the OECD,and two-thirds are destined for non-OECD countries.79EPR policy can be designed to manage textile waste beyond jurisdictional borders.The legal framework can stipulate that obligated producers are required to contribute financially to an earmarked fund,which financially supports collection,sorting,reuse,and recycling activities in those countries that the EPR scheme exports significant volumes of reusable textiles to.In practice,this involves including such financial support within the legally defined costs coverage.It also requires agreement between the government and obligated producers on an appropriate mechanism for delivering the funding to countries importing reusable textiles.A solid legal basis is crucial to ensure effective use of such an earmarked fund,underpinned by reporting.Policymakers need to establish rigorous mechanisms for the identification of countries to which textiles are exported,80 and the accreditation of entities eligible for receiving funding.Extending EPR across borders would require significant collaboration between governments and PROs,for example when determining ownership of materials and reporting on material flows across multiple countries and transit hubs.Extending the geographical scope of EPR is not a novel idea:it has been debated elaborately,and tested in practice on a voluntary basis.Academic researchers81 and NGOs82 have made elaborate proposals around ways to extend producer responsibility beyond borders(“Ultimate Producer Responsibility”)and deliver financial or technical assistance to countries that import used goods,such as electronics and used vehicles.In the European Parliament proposals were recently made to amend the EU Waste Framework Directive to include an analysis of the options to“extend the responsibility of producers to exports of used textiles”.Practical examples include the electronics sector,where PROs have delivered capacity-building and training for actors managing e-waste imports.83 To achieve a circular economy on a global scale,the idea of extending EPR beyond jurisdictional borders should be explored further.Shifting to a circular economy influences trade flows,increasing the trade of reused products and secondary raw materials.Against this backdrop,the relationship between a network of(sub)national EPR policies and the diverse range of national and international trade policies needs to be better understood.This includes pathways to operationalise collaboration,technical and financial assistance between EPR systems across borders.The interconnection between(sub)national EPR policies and global trade policies has also started to be explored,for example as part of the ongoing negotiations for a legally binding UN Treaty to combat plastic waste pollution.PUSHING THE BOUNDARIES OF EPR POLICY FOR TEXTILES43Expand the scope of negative externalities coveredThe textile industrys footprint stretches far beyond the generation of waste.In its current form however,EPR policy predominantly focuses on the externalities arising when products in scope are discarded and become waste.The potential of EPR policy to address other negative externalities remains underexploited.A significant opportunity to correct this course is the modulation of fees to incentivise design change(as explored above).While product design has a key role to play,not all externalities can be designed out.For example,while product design has a key role to play in limiting microfibre release(e.g.by developing new materials and fabric constructions),it is critical that effective solutions are put in place to capture microfibres when they unavoidably leak out throughout the use phase,in particular during washing.In this context,it is worth exploring a potential expansion of EPRs cost coverage to also finance the removal of micropollutants from wastewater.84 In addition,policymakers and experts are exploring the role of EPR to undo the damage caused by products that have leaked into the environment.A recent OECD report has outlined case studies where EPR systems cover the costs of littering as well as clean-up efforts,for products such as plastic packaging and tobacco filters.85 The ongoing debate on such an extension of EPR is complex,in particular because it is difficult to assign responsibility and trace pollution impacts back to specific products and substances in the case of uncontrolled disposal.Research is needed to understand the extent of textiles leaking into the envi
2024-07-03
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